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Different Programs That Offer Debt ReliefDebt consolidation helps consumers relieve debt problems and regain financial stability. However, some consumers who use debt consolidation to eliminate debts often incur additional debt. This situation usually occurs with homeowners who use a home-equity line of credit (HELOC) to pay off debt. Debt consolidation combines multiple high-interest debts into one low- interest account. Homeowners often use HELOCs to finance debt consolidation, but after making payments on the equity line for several years, the adjustable interest rate can rise above the initial debt's interest rate. Consumers can pursue a second debt consolidation program to help pay off the first program. However, consumers who already used their home's equity to pay off debt need to select an alternative method, which usually involves a cash-out refinance. Debt consolidation with a cash-out refinance can eliminate debt incurred from a previous debt consolidation program. For example, a homeowner may hold a $50,000 balance on a HELOC, plus a primary mortgage with a balance of $260,000. The homeowner refinances the primary mortgage for $310,000 and the $50,000 cash-out amount pays off the line of credit. Credit lines carry adjustable interest rates, which can increase rapidly over a short term. Mortgages can feature a fixed rate that consumers can use to ensure savings with debt consolidation. Author bio: Brian Williams, a graduate of the University of Texas at Arlington, has 11 years’ experience writing and editing at daily newspapers in Texas. Having worked his way through college and experiencing the transition to professional life, Brian understands how credit affects people’s lives. For more articles by Brian on credit consolidation and bankruptcy protection, go to http://www.creditsolutions.com. Credit Solutions is your alternative to debt consolidation.
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