Debt Consolidation

After a career in

personal finance

dating back to 1987 and

making home loans

since 1993, I have found many reasons NOT to

utilize a MORTGAGE to consolidate debts

. Every individual circumstance is different requiring a thoughtful analysis regarding options to improve your finances. First, I will describe two scenarios that I regularly review and the recommendations that I make involving mortgage solutions; then I will discuss why you shouldn[$SQ]t use home financing to relieve stress.

Thousands of clients have come to me over the years with debt loads that they have felt were somewhere between uncomfortable to downright crushing. Often there exists a "budgeting problem" where clients are spending beyond their means, but usually they arrived at their current status as a result of a financial hardship brought on by circumstances beyond their control. If you have family health issues, had an auto/work accident, have small business problems, have marital issues, witnessed your work industry's upheaval or are a victim of a natural disaster, you are among thousands of folks who have contacted me for help. These are events that we have only one financial response to. If it requires spending more money than we have income each month, we draw on our reserves and spend it. If we don't have the reserves to meet the financial challenge, we begin borrowing from those resources. At some point along the road, we hit increasing barriers of discomfort, one of which causes us to ask new questions, which I imagine is why you're reading this. I have found four "sub-categories" of folks that are overburdened with debt and in these situations. In two of these, I make a loan to solve their problems, two I do not.

The first group has a profile that appears almost financially in tact, and this group gets A BIG BANG for their buck with a mortgage solution. This group has overspent, but often over a longer period of time, and they have usually just barely paid their bills on time each month. However, they are very overextended and living "on the edge". This group has adequate home equity to enclose all their debts into one home loan which has a dramatically lower payment than their combined debts. When I make a recommendation to these folks of an adjustable loan which can literally save them thousands of dollars each month, they practically pass out, overwhelmed with relief! They can often qualify for a typical fixed rate, but choose the advantages of the adjustable. Their credit is acceptable and they can verify employment or self-employment, but usually NOT verify actual income, and this is OK. These folks are FUN to work with because the result is such a home run!

The second group has a financial profile that appears a bit less in tact. Their credit has deteriorated somewhat or even excessively. They may not have the luxury of as much home equity to work with, and verifying some sort of job, self-employment or any hint of an income source can get challenging. These challenges as they relate to making a beneficial loan are usually congruent with the extent of the personal hardship the client has been experiencing; the tougher the circumstances, the more difficult it is to create a meaningful solution. In most situations, by applying creative thinking and creative loan programs, all the debt can be combined and great financial results can be achieved. This category of folks are usually the most thankful, because I saved them from bankruptcy - the last resort.

There are two categories of folks in which I don't apply a new mortgage as the solution to their challenges. The first group unfortunately can't be helped with a mortgage because they are just too overextended, their credit has deteriorated too far, or they simply do not have enough equity to design a reasonable solution. The last group really hasn't accumulated enough high interest debt to justify the cost to refinance their home. I often get calls from this group, and frequently suggest second mortgages and revolving equity lines.

The bottom line is this - if you are unsure what group you fall into, give One Touch Lending a call today and we can walk you though the maze!