Mortgage loans are a dream of every first time home loan borrower. When it comes to those two types of loans they both have their distinctive features that make them attractive to borrowers. While FHA loans are less strict when it comes to requirements on a down payment and credit scores, conventional loans offer good rates despite higher down payments and stricter ratings on credit scores of borrowers. There are of course some problems that cannot be avoided. When financial difficulties set in, debt consolidation loans are usually considered as primary options. Under a debt consolidation plan, the borrower is only rolling all the current obligations into a new loan under a longer term with smaller monthly payments.
What Are The Benefits?
There are several benefits under a debt consolidation program as listed hereunder.
It can save the borrower from further defaults. The timely processing and approval for debt consolidation loans can save the customers from the failure of paying installments for FHA loans or conventional loans. It will spare their credit score from getting lower in case of defaults and could help maintain a good credit history with the loans under consolidation. In fact, a full settlement ahead of time would be advantageous to the borrower when it comes to a credit history.
A single loan
It will reduce the number of loans payable to one account. After approval, several loans still outstanding will all be settled as a single debt consolidation loan. For monitoring purposes, it will become easier for the borrower and the chances of an overlooked account will be reduced.
Less to pay
Normally when a borrower resorts to debt consolidation for FHA and conventional loans, the payment is reduced when compared to existing monthly amount totaled. This is mainly because most debt consolidation loans have longer terms than the loans that are ripe for consolidation.
A lower interest rate
If the borrower has a good credit score and favorable debt to income ratio of below 25%, the chances of getting a lower interest rate are very high. If you tally the total interest expense, it will be lower when compared to interest rates on the current accounts.
However, the downside of settling current mortgage loans is penalties for prepayments. This should be discussed with your lenders and must be given due consideration before applying for debt consolidation loans for FHA and conventional loans. If you find this option disadvantageous, go around and look for other solutions. You must take also into account the total interest you will pay throughout the term of the debt consolidation which could mean a significant amount.