Ease financial stress with these debt consolidation tools

Are you feeling financially squeezed with the amount of bills coming your way each month? You’re not alone. With the economic news lately, many 7 in 10 Americans are feeling financial stress.

While there are many ways to manage your financial stress, one of the most effective is by managing your debt. Debt can stand in the way of your financial goals, making it harder for you to save and invest. Reducing debt frees up more resources to focus on your financial future. 

There are many ways you could get a better handle on your debt and start working towards eliminating it. Many homeowners use the equity they’ve built up in their home to help them consolidate debt. But even if you don’t have substantial equity in your home to put towards debt consolidation, you can still find solutions that will help you take control of the amount you owe.

Our Debt Consolidator Products could help you get the financial flexibility you’re looking for. Here’s a rundown of the options you could take advantage of, and make sure you get in touch with a loan officer, who can help you decide which product suits you the best.

Debt consolidation through home equity

Home equity is simply the difference between how much your home is worth minus how much you still owe on your mortgage. It’s basically your ownership interest in your home.

Determining your home equity is relatively easy. 

For example, say you bought a home for $200,000, made a down payment of $20,000 and borrowed $180,000. Five years down the road, you’ve paid $13,000 of your mortgage off, you still owe $167,000, and your home’s value has increased to $220,000. To determine your equity, you take what your home’s current value is ($220,000) and subtract the amount that’s still owed ($167,000) – in this case, your home equity would be $53,000.

You could tap into that equity and use the funds to consolidate your debt through a cash-out refinance, a home equity line of credit (HELOC), closed-end second mortgage or a reverse mortgage.

Home Equity Line of Credit (HELOC)¹

A HELOC is a revolving line of credit that you could draw from as needed, similar to a credit card. The credit limit is based on your home equity, and you could withdraw funds during the initial draw period, typically up to 10 years. 

HELOCs offer flexibility, as you could borrow and repay multiple times during the draw period, with interest usually charged at a variable rate. After the draw period, you enter the repayment phase, where you must repay the principal along with interest.

Closed-End Second Mortgage²

A closed-end second mortgage is a loan that gives you access to your home’s equity while keeping your existing first mortgage in place. It provides a one-time lump sum with a fixed interest rate and set repayment term, making it a predictable way to access cash for things like home improvements, debt consolidation, or major expenses without refinancing your current mortgage.

Cash-Out Refinance³

A cash-out refinance replaces your existing mortgage with a new, larger one. The difference between the new loan and your current mortgage balance is paid to you in cash, which you could use to pay down your debt. 

This option could be beneficial if you could secure a lower interest rate on the new mortgage, potentially reducing your overall borrowing costs. However, you must maintain a minimum of 20% equity in your home after the refinance.

Using a cash-out refinance to help with your debt brings with it many of the benefits of refinancing: new interest rate, the ability to change your loan term and much more. It's simple, too. Use a cash-out refinance to take the equity of your home and apply it to debts with higher interest charges, from medical debt to credit cards to private student loans. 

Often, the interest rate on the new home loan, otherwise known as the mortgage rate, will be lower than the interest rate on your debt. This makes it possible for you to pay down that debt quicker because more of your monthly payment is going to the principal.

Reverse Mortgage ⁴

Available to homeowners aged 62 and older, a reverse mortgage allows you to convert part of your home’s equity into cash without selling your home. 

The lender makes payments to you, and the loan, along with interest, is repaid when you sell the home, move out permanently, or pass away. This option could be a good choice for retirees looking to supplement their income without monthly repayment obligations.

We offer a Home Equity Conversion Mortgage, or HECM, which is a type of reverse mortgage insured by the FHA. Borrowers also must also participate in independent counseling to ensure that they fully understand their financial decision.

Personal loans⁵ to consolidate debt

A personal loan is money borrowed from a lender at a fixed interest rate that is paid back by the borrower monthly over 1-5 years depending on the time frame and monthly payment option selected. Our personal loans typically offer higher loan amounts and lower rates than a credit card, feature a fixed payment plan and require no collateral. 

You could use a personal loan for nearly any expense, including paying down high-interest debt. Personal loans range from $4,000 to $50,000 in most states and offer a fixed interest rate.

How to use your loan to consolidate debt

The money you obtain from one of our Debt Consolidator Program products could be used to consolidate debt, from credit cards, education loans and more. If you use one of our home equity-based products, you are essentially transferring all your debt into one place: your mortgage. A cash-out refi, HELOC, personal loan or reverse mortgage allows you to get rid of differing due dates and various companies you owe to, putting all your loans and debt into one, easy to remember payment.

The benefits don’t stop there, however. The interest rates on mortgages and personal loans are generally substantially lower than on credit cards, for example. So, by paying off a higher mortgage rather than credit card debt, you are saving potentially hundreds of dollars each month⁶.

What to consider when consolidating debt in a mortgage

Even after securing a debt consolidation loan, it’s important to keep in mind that your debt isn’t gone; it’s just in a new place. You need to remain disciplined in your spending and not overspend on your now “debt-free” credit cards.

Another thing to consider is that it is almost never a good idea to secure a cash-out refinance at an interest rate that’s higher than the one you’re paying right now. If you find that is not possible, then a reverse mortgage (if you qualify) or a HELOC may be the way to go.

Also, make sure you’ll be able to afford the new payments on your new mortgage or personal loan. When undergoing a cash-out refinance, the balance of your mortgage increases by the amount of debt that you are paying off. Similarly, you’ll have to make monthly payments on any withdrawals you make from a HELOC or your personal loan. 

To see if our Debt Consolidator Program is right for you be sure to talk to one of our expert loan officers to see if this form of financing is right for you.

1 - Rate home equity line of credit (HELOC) is an open-end product where the full loan amount (minus the origination fee) will be 100% drawn at the time of origination. The initial amount funded at origination will be based on a fixed rate; however, this product contains an additional draw feature. As the borrower repays the balance on the line, the borrower may make additional draws during the draw period. If the borrower elects to make an additional draw, the interest rate for that draw will be set as of the date of the draw and will be based on an Index, which is the Prime Rate published in the Wall Street Journal for the calendar month preceding the date of the additional draw, plus a fixed margin. Accordingly, the fixed rate for any additional draw may be higher than the fixed rate for the initial draw. This product is currently not offered in the states of New York, Kentucky, West Virginia, Delaware and Maryland. The HELOC requires you to pledge your home as collateral, and you could lose your home if you fail to repay. Borrowers must meet minimum lender requirements in order to be eligible for financing. Available for primary, second homes and investment properties only. Dependent on minimum credit score and debt-to-income requirements. Occupancy status, lien position and credit score are all factors to determine your rate and max available loan amount. Not all applicants will be approved. Applicants subject to credit and underwriting approval. Contact Rate for more information and to discuss your individual circumstances. Restrictions Apply.

2 - Available as closed end, fixed rate, second-lien. Eligibility for second home and investment properties allows for only 10 total financed properties. The total of first and second-liens cannot exceed $3M. No more than two mortgage liens are permitted on a single property. Financing subordinate to the new second-lien is not permitted. First lien mortgages must be fully amortizing, fixed rate or adjustable-rate mortgage loans only. Minimum down payment and FICO score requirements apply and impact total loan amount available from $50,000 to $500,000. Maximum debt to income cannot exceed 50%. State and product restrictions vary so talk to your loan officer about what options may be available to you. Not available in all states. Additional restrictions apply. Not all applicants will be approved. Applicant subject to credit and underwriting approval. Not a commitment to lend. Contact Rate for more information.

3 - Using funds from a Cash-out Refinance to consolidate debt may result in the debt taking longer to pay off as it will be combined with borrower’s mortgage principle amount and will be paid off over the full loan term. Contact Rate for more information

4 - This is not a commitment to lend. Home Equity Conversion Mortgages (HECMs) are eligible for borrowers 62 and older. Borrower must pay property taxes, Homeowner’s insurance, HOA dues (as applicable), and maintain the home and using it as primary residence or the loan will need to be repaid. Otherwise, the loan must be repaid when the borrowers leave the home for more than 12 consecutive months, transfer their property's title to another person, the last borrower passes away or sells the home. Prices, guidelines and minimum requirements are subject to change without notice. Subject to review of credit and/or collateral; not all applicants will qualify for financing. It is important to make an informed decision when selecting and using a loan product; make sure to compare loan types when making a financing decision. This material has not been reviewed, approved or issued by HUD, FHA or any government agency. Rate is not affiliated with or acting on behalf of or at the direction of HUD, FHA or any other government agency. To find a Reverse Mortgage counselor near you, search the HECM Counselor Roster at https://entp.hud.gov/idapp/html/hecm_agency_look.cfm or call (800) 569-4287.

5 - Loans are made by Guaranteed Rate, Inc. (NMLS ID 2611).
Standard fixed rates from 9.99% to 21.99% APR. With a 0.25% autopay discount established at loan origination with an automated monthly debit from a qualifying deposit account for repayment, fixed rates range from 9.74% to 21.74% APR. Loan amounts range from $4,000 - $50,000 and are subject to state requirements. Loan proceeds cannot be used for post-secondary education expenses or to purchase cryptocurrency or securities.
Terms and Conditions: You must be 18 years of age or older (19 years of age or older in Alabama). To qualify, a borrower must be a US citizen, a permanent resident, or a non-permanent resident in the US on a valid, long-term visa. All loan applications are subject to credit review and approval as well as income and employment verification. You must meet our minimum requirements established for this offer including, but not limited to, credit history, debt-to-income ratio, and application information. Your actual rate depends on your requested loan amount, loan term, creditworthiness, and a variety of other factors. Loan amounts range from $4,000 - $50,000. Rates and loan amount may differ due to state-specific requirements and may impact your ability to qualify for a loan. Limitations: AR, CO, FL, KS, LA, MA, ME, MN, NC, PA, RI, TX, VT, WI and WY (rate); AK, CA, IL, MA, NH, NM, RI and SC (amount); OH (duration). The lowest rate advertised is reserved for the most creditworthy borrowers. Advertised rates and terms are current as of 02/21/25 and are subject to change without notice.
 An origination fee of 0%-6% is charged for each loan, which will be deducted from any loan proceeds you receive, and are subject to state requirements. Restrictions apply, please refer to rate.com/personal-loans for more information.
 Personal loans are only available in AK, AL, AR, AZ, CA, CO, CT, DC, DE, FL, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MT, NC, ND, NH, NJ, NM, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VT, WA, WI and WY as of 02/21/25. Loan applications outside of these states will not be accepted at this time.

6 - Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact Rate for current rates. Restrictions apply.

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