consolidation loan..A GOOD IDEA?

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I have a FHA 5.0% fixed mortgage rate now. Would it be wise to consolidate all my credit cards, loans and mortgage to a FHA Bill Consolidation Loan at a fixed 6.0% rate? I know this would stop the creditors from dropping my 40% ratio to a 95% balance to limit ratio, and raising my interest rates for “maintaining profitability on my account”. All my accounts are paid on time and above minimum, at very low interest rates….I’m puzzled

3 Comments
  1. Reply
    md_spider
    May 1, 2011 at 1:48 am

    This is only a good idea if you have equity and you have enough discipline not to run the cards up. so many people consolidate and then run the balances back up.

  2. Reply
    annah618
    May 1, 2011 at 2:20 am

    No!!!!!!

    First of all – Credit cards are unsecured debt… your mortgage is a secured debt. NEVER trade unsecured debt for secured debt.

    Second – Do the math — you are paying 5% on A LOT of money – probably $ 200,000 or more and you are paying X% on a LITTLE bit of money (comparatively speaking) — why would you want to raise your interest rate on that $ 200,000, just to save a little bit on your credit card balances? In the long run the extra interest on your mortgage balance will far outweigh any savings on your credit balance.

    Do the math – A one percentage point increase on 200,000 over 30 years is $ 45000 dollars in interest!!! How much are you going to save on your credit card interest? Definitely not more than 45K!!!

  3. Reply
    Noneya
    May 1, 2011 at 2:26 am

    First lets start by addressing the FHA Bill Consolidation Loan – no such thing.
    This is just a fancy way of saying they want you to do a cash out refinance.
    Next – I can get the same cash out FHA loan at rates from 4.75 – 5.125% on a 30 year fixed.
    Now to the really question – should you do it. If it is going to save you enough money every month then yes do it. There are other benefits like taking the interest you are paying on the credit cards and turning that into a tax deduction.
    The best thing to do is take the monthly savings and apply that back to the principle balance every month.
    I can show amortization schedules to break down how this will affect your overall interest savings.

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