Managing multiple high-interest debts can be overwhelming. Credit card balances, personal loans, auto payments; these monthly bills add up quickly. If you’re a homeowner in Colorado, a debt consolidation loan may offer a smarter, simpler solution.

At Choice Mortgage Group in Centennial, we help clients use the equity in their homes to consolidate debt through a mortgage refinance—often reducing total monthly payments, simplifying finances, and saving thousands in interest.

What Is a Debt Consolidation Loan?

A debt consolidation loan allows you to roll multiple debts into one new mortgage loan, typically through a cash-out refinance. This means replacing your current mortgage with a new one, taking out extra funds to pay off high-interest debt like credit cards, personal loans, or medical bills.

Instead of making several payments each month, often at double-digit interest rates, you’ll make a single, manageable mortgage payment, often at a lower rate than what you’re currently paying on unsecured debts.

Common debt consolidation questions answered below in our debt consolidation FAQ section!

How a Cash-Out Refinance Works

Let’s say your home is worth $500,000, and you owe $300,000 on your current mortgage. Through a cash-out refinance, you might be able to refinance into a new loan for $400,000. You’d use $300,000 to pay off your current loan, and the remaining $100,000 could be used to pay off debt, consolidating your finances into one lower-cost payment.

The new loan replaces your old one, and you now have a single mortgage payment instead of juggling multiple bills.

What Types of Debt Can You Consolidate?

Homeowners often use debt consolidation loans to pay off:

  • Credit card balances
  • Personal loans
  • Auto loans
  • Medical debt
  • Student loans (in some cases)
  • Home improvement loans
  • Revolving credit accounts

If you're paying more than 10–20% interest on any of these debts, a refinance could significantly reduce your interest costs and improve your cash flow.

Benefits of Debt Consolidation Through Refinancing

  • Lower your monthly payments by reducing interest
  • Simplify your finances with just one loan to manage
  • Improve your credit score by lowering credit utilization
  • Free up monthly cash flow for other financial goals
  • Potential tax benefits (consult a tax advisor)

It’s not just about reducing stress, it’s about creating financial breathing room, taking control of your payments, and using your home equity strategically.

When To Consider a Debt Consolidation Loan

This strategy works best for homeowners who:

  • Have sufficient equity in their home
  • Are currently paying high interest on unsecured debt
  • Want to simplify multiple payments into one
  • Plan to stay in their home long enough to benefit from refinancing costs

We’ll help you compare the pros and cons, calculate potential savings, and see if the numbers make sense for your unique situation.

As a local Centennial-based lender, we understand the Colorado housing market and can help you decide whether debt consolidation through refinancing aligns with your goals.

If you’re ready to simplify your debt and improve your financial outlook, we’re here to help. The process starts with a free consultation and rate analysis, no pressure, just honest guidance.

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Helpful Resources

Debt Consolidation Loan FAQs

A debt consolidation loan combines multiple high-interest debts — like credit cards or personal loans — into a single loan with one monthly payment. Many Colorado homeowners use home equity or a cash-out refinance to do this.

Yes! A cash-out refinance lets you tap into your home equity and use the funds to pay off debt. This can lower your interest rate and simplify your monthly payments.

Benefits include a lower overall interest rate, fewer payments to manage, potential tax advantages, and a faster path to financial freedom.

Using home equity can be a smart strategy if you have a plan to avoid re-accumulating high-interest debt. It's important to work with a trusted mortgage expert (like me!) who can run the numbers and help you make the right call.

You typically need at least 20% equity in your home to qualify for a cash-out refinance, but it varies based on your credit, loan type, and overall financial picture.

In many cases, consolidating debt can improve your credit score over time — especially if you reduce your credit utilization and make on-time payments.

Yes — a home equity loan or home equity line of credit (HELOC) allows you to keep your current mortgage and take out a second loan based on your home’s equity.

Start by talking to a local lender who understands your goals. I’ll help you review your debts, estimate your savings, and see if this strategy makes sense for your situation.