Fortune and Slate Provide Debt Consolidation and Refinancing Strategies

Fortune and Slate have released financial guidance on debt consolidation and loan refinancing, emphasizing the need for borrowers to calculate total interest over a loan's life rather than focusing on monthly payments.

Fortune details the trade-offs of using a cash-out mortgage refinance to consolidate high-interest unsecured debt like credit cards. While this strategy can lower interest rates, it converts unsecured debt into secured debt, which exposes the homeowner's property to foreclosure risk. Additionally, these refinances typically incur closing costs between 3% and 6% of the loan amount. Fannie Mae generally limits these conventional cash-out refinances on one-unit primary residences to 80% of the appraised value.

Separately, Slate's 'Pay Dirt' column provides advice on car loan refinancing. The guidance suggests that making a lump-sum principal payment before refinancing is the most effective method to reduce monthly payments without extending the overall term of the loan.