Banks and credit unions also offer unsecured debt consolidation loans that don’t touch your home. They’re worth comparing before you borrow against your house.
Unsecured consolidation loan
- Not secured by your home, so your home isn’t at stake
- Fixed payments and a set end date, often a few years, which forces the debt down
- Higher rate than a mortgage, but lower than most cards
- Approval depends on credit and income; harder with damaged credit
- Usually smaller amounts than a mortgage can provide
Consolidating into your mortgage
- Lowest rate, because it’s secured by your home
- Larger amounts possible, based on equity. See equity needed.
- Long amortization unless you choose to pay faster. See lower payment can cost more.
- Your home secures the debt
- Setup costs and possibly a penalty. See the costs.
How to choose
- Smaller debt, good credit, want a hard end date: an unsecured loan may be ideal.
- Larger debt, need the lowest rate, have equity: the mortgage may win.
- Damaged credit: a mortgage through an alternative lender may be the only option.
This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.