Consolidate Debt
Often, individuals will have several loans at varying interest rates. For example, a person might have a car loan at 8%, three credit card balances at 12%, 15%, and 18%, and a personal loan at 7%.
Loan Consolidation or debt consolidation might involve taking a home equity loan at perhaps 5% and using that to pay off all the existing loans described above. The loans would all be rolled up into a single sum at the lower rate.
Such consolidation loans have the benefit of reducing interest payments over time, which could be hundreds of dollars monthly. In addition, instead of having to deal with multiple bills each month, you only have to deal with one.
If such debt consolidation loans happen to be home equity loans, then they are most likely tax-deductible. Consult of course, with your tax adviser on this.
Consolidating student loans can also occur using the same technique. Several high interest student loans can in fact often be consolidated into one large student loan at a lower interest rate or into another type of loan entirely.
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