In football, the best quarterbacks have the ability to call an audible, or change the play, right before the ball is hiked. Debt consolidation is a great way for you to call an audible if debt has blitzed your finances.

For even the wealthiest individuals, debt is a part of life. Most people own a mortgage, a car, or other properties. There's always something to buy, and someone willing to lend them the money to buy them.

That's fine, as long as your debt doesn't exceed your income level year in and year out. Life is full of unexpected changes and challenges, however, and there may be an occasion when you find yourself too heavily in the red. At that point, a debt consolidation loan can save the day. Here are the benefits:

1. Lower interest rate, lower long-term interest costs


A debt consolidation loan is used to pay off credit card or consumer loan balances with high interest rates. A mortgage refinance or second mortgage is generally the preferred debt consolidation loan, primarily because of their low interest rates. The lower rates lead to smaller overall monthly payments.

The short-term savings are nice, but to come out ahead in the long run, apply a portion of the newly-found cash flow to the principle of the loan. The maneuver will help mitigate any long-term interest costs.

2. Tax-deductibility is a plus


One of the benefits of using a first or second mortgage as a debt consolidation loan is that the interest is tax-deductible. While no one likes to carry debt, the perk can help when April 15th rolls around-particularly if you don't have many tax deductions. Be sure to consult with your tax advisor, because the IRS naturally institutes some limitations. Second mortgage amounts of $100,000 or more, for example, are not deductible.

3. Consolidation means one payment


Far too often, people miss payments on credit cards simply because they can't keep track of all their monthly payments. By consolidating your debts, you can combine most, or all, of your expenses into a single payment. As an added bonus, you can close some credit card accounts, and not be tempted to run up new bills.

4. Peace of mind


The mental health benefits of a debt consolidation loan may be priceless. Stress can affect you physically and emotionally, and relieving yourself of this heavy debt burden will feel like the weight of the world has been taken off your shoulders.

No matter where you fall on the financial spectrum, you have to effectively manage debt. The size of your paycheck doesn't matter when it comes to fundamental debt management. Overall, your spending must be less than you make. A debt consolidation loan can help you organize your debts. It's a proven way to bring the red ink under control and get your finances heading in the right direction, like a football team marching toward a score.

Published on November 11, 2007