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Saving, Managing Debt, and Budgeting

Managing Debt

What is “debt consolidation”?

Debt consolidation is the act of taking out a loan in order to pay off several others. Assume that you have credit card debt carrying interest rates as high as 20%, and you have a home mortgage (with some equity in your house) with an interest rate of 5% for 30 years. In a consolidation, you take out a home equity loan (which charges a smaller interest rate) for the value of your high-interest credit card debt, and then make payments on your equity loan until the debt is repaid.



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