Debt Consolidation Loan FAQs

Are you thinking about taking out a debt consolidation loan? Make sure you understand the obligations...

What is debt consolidation?

Debt consolidation entails taking out one loan to pay off several others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.

What is debt consolidation most recommended for?

Debt consolidation is often useful when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. A debt consolidation loan would therefore save you money.

Do I need a mortgage to get a debt consolidation loan?

Debt problems can often be solved by consolidation of your existing debts. You don't need a mortgage to be able to consolidate your existing debt.

What if I already have a mortgage?

If you do have a mortgage, your existing debt from personal loans and credit cards can be incorporated into your mortgage at a much better interest rate. Consolidation will reduce your interest rate overall, and in this way save you money. Consolidation of your debt into your existing mortgage is most effective for larger amounts of money.

What about smaller amounts of money?

For smaller amounts of money, consolidation of your loans into a single personal loan is the best solution. In most cases, there are several options available.

Are debt consolidation loans tax deductible?

Depending on the cost basis of your home, the interest portions of the loan may be tax deductible.