Refinancing for Debt Consolidation

By Karen Lawson
Local Lender Columnist
Mar 21, 2007
Like many homeowners in Los Angeles, you've accumulated a significant amount of home equity in recent years. Refinancing for debt consolidation is a way to put your home equity to work. If you're carrying credit card balances and have consumer loans for furniture or vehicles, you may qualify for a new mortgage and get enough to pay off your bills. Which bills should you consolidate with refinancing? Are there any you should not pay by refinancing? The answer depends on several factors.

Refinancing: Paying Attention to APR

APR, or annual percentage rate, refers to the percentage rate of interest, fees and charges you pay on loan or credit card balances each year. Financial advisors frequently recommend paying off highest APR accounts first, and this is also true when refinancing. Consumer credit often features complicated methods of charging interest, and refinancing can save on charges that you don't notice when paying monthly installments. On the other hand, if you have accounts such as auto loans at no or a very low interest, it may not be judicious to include such loans in debt consolidation.

Refinancing and Student Loans

Many homeowners have student loans through the US Department of Education or private lenders. If you're considering paying off your student loans through debt consolidation refinancing, you'll want to verify the interest rate you're paying. Federal student loan rates have dipped below mortgage rates in recent years. If you refinance this type of loan, it becomes debt that is secured by your home. A financial advisor can help you develop a plan for debt consolidation refinancing that works for you.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds a Master's degree in English from the University of Nevada, Reno.