Some people use debt consolidation for their mortgage in order to reduce their monthly payments. People who have equity in their homes opt for consolidation to save on monthly payments for credit card debt, student loans, and personal loans.

The person opting for debt consolidation needs to fulfill the prescribed equity requirements and credit rating. For instance, if a person avails a loan of 85 percent of the value of their home; he should have a credit rating of at least 700. Otherwise, the credit requirements are akin to those required for home purchases.

Debt consolidation is recommended for people who tend to pile up credit card expenses. The President of Equity Now, a mortgage bank in New York City, stated an instance where a person was burdened with credit card debts for repairs to his home due to Hurricane Sandy. He received cash out of refinancing and paid $175,000 towards his debts. It is possible to reduce payments on consolidation by cashing out equity in from your house. However, the equity should not be the first preference for paying off debts. Equity in homes should be taken as a valuable asset for savings which can be cashed out only in case of emergencies.

People must be careful while using credit cards for regular expenses. This source does not provide unrestrained funds. It can be problematic if the individual uses the maximum utilization of their credit cards. In such cases, s/he will not be left with any resources for emergencies. Also, the individual may not be able to avail a cash out refinance due to a poor debt-to-income ratio (DTI). However, the credit card debt may be disregarded while computing DTI and the individual may become eligible for a cash out refinance. Credit card debt problems are not superficial; but these problems arise due to poor planning and management of funds.

People should obtain guidance from experts about opening and closing new credit accounts, limiting expenses, etc. These things affect overall credit ratings and should be dealt with vigilantly.