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Consolidate Bills: Refinance or Personal Loan?

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Mark Cappel
UpdatedApr 4, 2007
Key Takeaways:
  • There are three important criteria for getting a loan.
  • You may not be able to refinance and consolidate two different loan types.
I would like to consolidate my car and my timeshare.

I would like to consolidate two bills.. My car and my timeshare.. Would my timeshare fall under a mortgage refinance loan or a personal loan..? I do not own a home .. yet. At the end of the year I will.

I confess, I feel a little stumped by your question. That is because I simply do not know enough about your car and car payment, number of payments remaining and interest rate on the auto loan, your timeshare payments, any equity you may have developed (not likely) in the timeshare. I also have no idea of what your goals are and for what purpose you wish to consolidate only these two debts. Also, your comment about acquiring a home at the end of the year is a bit cryptic. Are you going to purchase a home, meaning applying for credit to do so, or are you expecting a gift or inheritance of a home and real property?

For now, I will make general assumptions about the debts and fashion general answers to see if I am anywhere near the mark.

If one of your goals is to create a single debt from these two notes, I do not see an advantageous way to accomplish this. The two forms of collateral are too disparate to act as collateral for a single note. An entirely different set of requirements apply when real estate is used as collateral than when personal property is the collateral.

If you do not use collateral the debt will be unsecured which practically ensures a considerably higher interest rate than either of the two existing notes.

Your timeshare interest is technically real property, and the current note is a real estate note and mortgage. See the resource How do we sell a timeshare we can no longer afford? to learn more about selling a timeshare.

However, I doubt that you will find a non-captive real estate finance company to lend money on yours or any timeshare since usually they do not appreciate like normal real estate. On the open market they are treated as personal property in the nature of a lease or contract right. Please peruse the Savings Center see if you can refinance the auto loan at an interest rate lower than the current auto note and extend the payments so that your monthly car note decreases by a significant amount.

Refinance the timeshare interest with the original lender if your inquiry shows that you might lower the payments and receive a better interest rate if you refinance. I hope this helps in your particular situation.

If you are interested in learning about how to qualify, generally, for a bill or debt consolidation loan I detailed a few criteria below:

Typically, there are several considerations when getting a loan — three of the most important are:

  1. Your loan-to-value
  2. Your debt-to-income ratio
  3. Your credit rating

Your credit rating is low, placing you in the subprime category, but that does not rule out getting a loan that meets your needs.

I will review each one in turn.

Loan to value

This is calculation looking at how much you want to borrow, relative to the value of the home. It is directly impacted by the amount of money that you can put down on your new home. The larger the down payment, relative to the value of the home, the less risk the lender has to take in extending to you a loan.

Debt to Income

This ratio looks at your monthly debt obligations (payments of interest and principal) as a percentage of your monthly income. If you have a significant amount of debt, your debt service burden may be too high for a lender to comfortably give you a loan. You need to either increase your income, or cut your debts.

Credit Rating

Your loan, including terms like interest rate and points, will depend on your credit worthiness. One measure of credit quality is a credit score (sometimes a specific 'FICO' score). Your credit rating is calculated based on several variables, including:

  1. Your payment history (do you have any late payments, charge-offs, etc.)
  2. The amount and type of debt that you owe
  3. If you have maxed out any of your trade lines
  4. Several other secondary factors such as the length of your credit history and how many recent inquiries have been made to look at your credit history.

If you have a good credit score you will find the best rates.

The Refinance Calculator helps you to decide whether a refinance makes sense for your specific situation. The Home-Account Service allows you to see the very best rates that have already been qualified for based on your income, home value, and credit — and request that specific loan from the lenders shown. Or if you prefer to talk to a some lenders and negotiate the best terms with a few, get a Quick Quote and get matched with some of the best lenders in the country based on your unique situation and needs.

The Best Rate May Not be the Best Deal

The interest rate of your loan should never be the sole consideration. In some situations, you may not want the offer with the lowest rate. If for example the low rate is dependent on taking a three-year adjustable rate loan, when you know that you will need to keep the loan for at least a year or two in to the adjustment period. In that case, you should consider a five-year or ten-year ARM, or a fixed-rate mortgage. Or if you need to get cash from the refinance to pay bills or use the cash for other purposes, then you might want to choose a mortgage with a slightly higher rate to get the loan that makes the most sense for your situation.

I hope this information helps you Find. Learn & Save.




BBill, Aug, 2010
Please see the student loans page to learn more about qualifying for a student loan.
PPersonal Loan, Aug, 2010
I am a student and i want a loan for further studies. Can u please suggest me how can i get it?
BBob Brown, Jul, 2010
I am planning for a new home by the end of this month. I am really confused considerations should i go for!
BBob brown, Jul, 2010
I have got more information from your system then also i have also get an information regarding it.
BBill, Sep, 2009
See my reply to another reader who had a somewhat similar question Consolidate My Credit Card Debt for your options. As you are finding, a loan is going to be difficult until you can move away (in time) from the foreclosure.
ffrank reed, Sep, 2009
I'am looking for a consolidation loan of 35k-40k. We have a home paid off with tax value of 95k. Lost my job in chicago 2 years 8 months ago and had to let the house in chicago go to forecloser. We moved back to Idaho and got a job back with a mining company which i had worked for before. My credit scores are 680-690 and banks will not offer money with forecloser under two years. I make 75 k pluss yearly and would like to get the credit cards consolidated in a 6 to 8 year loan. Can yu help?
BBill, Jan, 2009
You have to be clear about the type of consolidation service you need. If you are looking for a debt consolidation, then the only way you can get a loan that big is if you have an existing mortgage with some equity in it. Getting a personal unsecured loan for 47K is just not possible. There are other services such as credit counseling and debt settlement but they will not work with student and auto loans.
SShawn McGarry, Jan, 2009
I have three bills I was hoping to consolidate. I have two school loans and a auto loan combine are about 47,000.00. I need to consolidate they so I aint paying for them for the rest of my life.
BBill, Oct, 2007
A possible alternative loan resource you may want to explore is a peer-to-peer loan from Prosper or Lending Club. Both put private lenders in contact with private borrowers. A private lender may be more willing extend you a loan than a traditional bank. If you cannot find a loan that suits your needs, you may want to continue working on your credit score. The more you can increase your credit score, the better loan terms you will be able to obtain. There are many steps you can take to help improve your credit score. The most important thing you can do is resolve any outstanding delinquent accounts, then make sure to make all payments to your creditors in a timely manner. Having several accounts with long histories of timely payment should have a positive influence of your credit rating. If you do not have many credit accounts, such as credit cards, you may want to open some new accounts to help you build a positive credit history. Ideally, you should pay off the balance of your credit cards each month, but if that is not possible, at least make your minimum payments on time to help build your credit score. For more information about credit and ways to improve your credit score, I encourage you to visit the Credit Resources page.
cchristie, Oct, 2007
I would like to consolidate some bills on personal loan that I have but my credit score is only 541 and no one will even offer to help what can i do to make my bills into one payment a month please help.