A Bad Credit Debt Consolidation Mortgage Could Tie You Down for Decades

Homeowners at the end of their rope with too many debts to pay off may turn to a bad credit debt consolidation mortgage, which consolidates all their debts into one payment — the mortgage payment. Through a bad credit debt consolidation mortgage, other loans are paid off by the mortgage company, and the homeowner makes repayments to the mortgage company. Although this may be beneficial for some who face a cash crunch, there are two disadvantages of a bad credit debt consolidation mortgage to consider.

First of all, the difference between the current value of the property less the original purchase price must be large enough to cover the amount of debt to be absorbed by the bad credit debt consolidation mortgage. It is somewhat like a home equity loan, except that in that case, the equity is available at the time of purchase. This kind of mortgage is more likely for a property that is acquired through foreclosure or tax auction, because in such cases, the purchase price is usually significantly less than the mortgage sum.

If you take out a bad credit debt consolidation mortgage, you will be paying for all absorbed debts for the duration that it takes to pay off your mortgage. This means credit card purchases, etc., will take as long to pay off as your mortgage.

Some Belt-Tightening May Prove Helpful

Don’t go too far in including other loans and credit card debt into your bad credit debt consolidation mortgage, if you are qualified for one. Remember that the major part of your home equity would already be factored into your bad credit debt consolidation mortgage; it may be some time before you can obtain any more funding through a home equity loan.

If your bad credit debt consolidation mortgage is approved, your lender will pay off your other creditors. Check to make sure that your creditors have been paid off before relevant due dates, and be sure to retain written records of your debts being paid off. Also make sure that your credit report reflects the fact that those debts have been settled. You want to make sure that your efforts at getting a bad credit debt consolidation mortgage do not go to waste.

Bear in mind that the loans absorbed by the bad credit debt consolidation mortgage can take as long as 30 years to pay off, so consider whether you really want to pay for those burgers and fries and other consumer purchases for the next three decades.

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To Your Financial Success
~Suze Fulton

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