Traditionally the least expensive way to get a debt consolidation loan was to use the equity you have in your house as collateral. In many cases this involves taking out a second mortgage on your house, or refinancing in order to get some cash out of your house to pay off other debts.

On one hand this is a risky way to do debt consolidation. You take that debt is unsecured on financial instruments like credit cards and you roll it into secured debt like your home mortgage. This means that debtors can come after your house if you do not make your payments. However the reason that this type of debt consolidation has a lower interest rate is because the risk is moved from the lender to you personally. You have to pay a higher interest rate for a higher risk loan. Your home mortgage is a lower risk loan for the lender than the outstanding balance on your credit card.

Given the historic low interest rates we are experiencing today, this risk might be worth taking. You can get a lower interest rate mortgage today then you probably could’ve at any time in the past. By refinancing you may be able to get the cash out you need to pay off your higher interest that in some cases you may be able to get a rate as low as three or 4%.

What you want to watch out for situations where you could become insolvent by losing your job or having some other catastrophe. Make sure you have enough cash reserve to handle being out of work for a while in case something should happen to you.

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Life insurance is very important unfortunately it’s something we don’t usually think about. No one wants to concentrate on what would happen if they died. However if you were to die and leave your family behind life insurance could be the difference between them wallowing in debt or having a comfortable time in life.

Most families that make a number of financial decisions based on the idea that both the husband and wife will still be around for years to come. They buy a house, buy a car, take out loans, get education, consolidate their debt, have kids, get a dog and a number of other things that create ongoing financial responsibility. Most of those financial responsibilities continue even after one spouse has died. Life insurance allows you to protect against that happening. I guess you can’t protect against time but it allows you to make sure it that the remaining spouse has the resources needed to continue the financial obligations.

When one spouse dies it places a much greater burden on the remaining spouse to take care of things. Taking care of several kids can be manageable with two adults–even if they are both working. But trying to take care of kids and work a full-time job when you’re the sole breadwinner can be nearly impossible. On top of that consider the cost of housing that was purchased based on expectation of multiple salaries. Cars that were purchased based on payments being made from it to salaried household and all the other little expenses they can add up to something significant.

There’s several different types of life insurance. The most economical is term life insurance. Term life insurance allows you to get coverage for the years when you still plan to be financially productive. It is fairly inexpensive because you’re insuring against death during the years when you are least likely to die. However at the end of the term insurance policy is not worth anything. So if you have a 20 year term policy you’re covered for the 20 years and you make the payment for the 20 years. After 20 years there is no value left in the policy and if you were to die in your 21 you get nothing. 20 and 30 year terms are fairly common. This type of insurance for someone in their mid-30s is likely to cost $3-$500 per year for a half-million dollar policy.

Right now than exceptionally good time to buy life insurance. Rates are at the lowest they’ve been in years. Term life insurance allows you to lock in these rates for the entire term. So if you’re looking at getting life insurance now is a very good time to check into it.

There are other types of life insurance as well. In particular there is universal life this is also known as whole life. This type of life insurance also doubles as a type of retirement fund. It is worth something when you die no matter how long you live. From this standpoint acts more like a retirement account that has an insurance component. If you continue to live a long life when you do finally die your family will get the money you invested. If you die ahead of time it has an insurance component built into it that will give your family more than what you invested. These type of life insurance policies have cash value so it’s possible to cash them out while you’re still alive. Many people like this flexibility. There are also some tax advantages of these type of accounts. However many financial advisers suggest against these because they feel it is better to separate your insurance from your investments.

Regardless of what type of insurance you get is always cheaper to get it today than tomorrow. The older you get the more expensive insurance will be for you. Getting it when you’re young how to lock in a lower rate that will continue through the rest of the term or in case of universal policies the rest of your life.

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Is there any such thing as a debt free consolidation loan? Yes. Obviously if you are taking out a loan you are not debt-free. But a consolidation loan may be an integral part of your strategy to become debt-free.

Everyone is excited about the destination of their debt free journey. But much of the value comes from the practices and disciplines you develop along the way. Being debt-free is a lifestyle and a way of managing your finances. Even if you are not debt free today you can still manage your finances with the frugality and restraint a debt-free lifestyle requires.

This is where debt free consolidation loan may be beneficial. A debt consolidation loan that is designed to help you get out of debt can be a vital strategic move. A debt free consolidation strategy involves a high degree of financial literacy. You must understand exactly what you are committing to in the details of the consolidation loan.

Without this financial literacy you may be able to consolidate your credit but you are not making a strategic debt free consolidation move. Your self-discipline, fiscal restraint and financial understanding are just as much if not more important than the loan itself.

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