Is It Beneficial to Refinance Your Mortgage for Debt Consolidation?

Debt consolidation is a popular way to avoid paying huge interest rates for existing debts. Through the process of debt consolidation, multiple debts are converted into just one easy-to-manage debt with just one billing instead of having to keep track of multiple bills a month. It works by borrowing enough money to pay off smaller debts to ‘convert’ them all into just one debt. One way to do so is to refinance your mortgage.

How to Get Rid of Debt in Canada

With recent developments in world events, more Canadians are weighed down by debts these days. Almost everyone has credit card debts, personal loans, car loans, student loans, and other types of loans. It is easy to get buried in debt just by forgetting to pay one bill every now and then. Some people are so overwhelmed by multiple bills that all they can do is to pay off the minimum or just the interest in an effort to stay on top of their bills. By doing that, they keep paying without making a dent in the actual amount owed because all their payments pretty much go to covering just the huge interests. One delayed or missed payment can cause the debt to balloon even larger because trying to handle multiple small but high-interest loans is tricky and comes with a lot of pitfalls. With all these things to consider, it is easy to see why debt consolidation is the smart way to go.

Consolidate Debt the Smart Way

Note that not all ways to consolidate debt can make things easier for you. Some still come with high interest. To save the most in interest, it is best to pick a secured loan such as a HELOC or a home equity loan if you’re not interested in refinancing your mortgage.

What makes debt consolidation attractive is it usually helps save money, time, and effort. When multiple high-interest loans are combined into a single lower-interest loans by paying all the existing past balances with the money from the new loan, you will be closing all old debts by combining them into one. When properly executed, a debt consolidation plan can ensure that the debt is paid months to years in advance as compared to the original loans.

Should You Refinance Your Mortgage for Debt Consolidation?

Refinancing your mortgage for debt consolidation is a smart way to plan a lower interest and more manageable debt. Although most mortgages charge around 5% interest, most credit cards charge 15-30% interest per month, so imagine the savings over time. You will be able to save possibly thousands of dollars just in interest but forget though that refinancing your mortgage will come with fees. Closing costs typically are charged 1-5% of the total loan and that can hurt some pockets but if choosing between this and paying 10-20% interest or more per month, it is easy to make a choice.

Is it beneficial to refinance mortgage for debt consolidation? No doubt, yes! If you have more questions or want a detailed explanation as to how some things may apply for your specific situation, then contact us at Homebase Mortgages Canada.

Debt Consolidation Loans

Debt consolidation loans have ads everywhere, but do they really work? How can a debt consolidation loan help someone who is struggling financially with debt if it is just another type of loan? What makes a debt consolidation loan better than other loans?

What is Debt Consolidation?

Debt consolidation is a process with which you can combine all existing unsecured debt you have under one monthly payment. This means that under debt consolidation, you can combine your payday loans, credit card debt, and other high-interest personal loans. Debt consolidation is typically done by borrowing money from a private lender or a bank, seeking debt relief via a Consumer Proposal to your creditors, or taking on a Debt Management Program.

What is a Debt Consolidation Loan?

A debt consolidation loan is a loan obtained to pay for the combined balances of various debts. By going this route, the borrower can save a significant amount on interest rates and have an easier time managing debt because there is only 1 bill to take care of.

Is it Easy to Get a Debt Consolidation Loan?

Although getting a bank loan is a very popular way of obtaining a debt consolidation loan, it is not easy to qualify for and usually come with a variety of rules and limitations. For borrowers who’ve already received a collection call or missed a payment, it is often already too late to apply for a debt consolidation loan from a bank. Banks require a steady income, a spotless credit history, and a good size of home equity or a co-signer.

Note that for those who can get a debt consolidation loan using their home equity, missing payments could mean losing their home and getting further into debt. For those who had a co-signer, failing to pay could mean placing the co-signer in huge debt.

Expectations About Ways to Consolidate Debt

There are many ways to manage debt consolidation depending on which of the following you chose to handle it with:

Private Lender

If you borrowed money from a private lender, know that interest rates will still be on the high side more so if you will consider the fees. Interest can be as high as 30% and failure to pay on time can mean huge losses on your part.

Debt Management Program

If you used a Debt Management Program, you will have to adhere to the terms negotiated by the councilors with your lender although the terms are not legally binding. This also means that you have enough money saved up to pay for your necessities, otherwise, you won’t be able to afford the program.

Consumer Proposal

If you cannot pay your unsecured debts on time and owe less than a quarter-million in unsecured debt (without adding your mortgage debt), then you may qualify for a Consumer Proposal. For those who owe more than $250,000, a Division 1 Proposal is what you may qualify for. A Consumer Proposal will benefit you greatly if the majority of your unsecured debts’ creditors accept it because everyone that you owe money from will have to accept the Proposal, reduce the amount of your debt to what you can afford, cover all unsecured debt in less than or equal to 5 years, give you a chance to fix your life, and stop all legal collection actions by the creditors of your unsecured loans. Lenders accept a Consumer Proposal because it allows them to get paid more as compared to when a person files for bankruptcy instead.

To know more about debt consolidations loans and how they can help you, contact us here at Homebase Mortgages. We’ll be happy to discuss which one is the best for you according to your specific circumstances.

Should You Consolidate Debt? Your Debt Consolidation Considerations

Debt consolidation is becoming more popular these days but is it worth it to consolidate your debt? Basically speaking, debt consolidation is the process of making your life easier by converting multiple high-interest debts into a single lower-interest debt. It may not be for everyone but it is best to inform yourself about debt consolidation considerations before making a decision whether you will consolidate debts or not.

When to Consolidate Debt

Certain scenarios are better suited for debt consolidation than others. You can consider consolidating debt if the following situations apply to you:

  • You have income that is at least twice your debt. This amount is small enough to be perfectly manageable with debt consolidation.
  • You have a reliable and enough cash flow to cover the expenses of a new loan. You can afford fees.
  • Your credit is good. If your credit score is more than 650 then you can qualify for a 0% introductory period as well as lower over-all interest.
  • You understand that you must control your spending and that debt consolidation is just a tool to help you fix your finances. You know that you must take actions to alter your spending habits.

When to Not Consolidate Debt

Not everyone can benefit from debt consolidation. It is recommended to look for other options if any of the following situations apply to you:

  • You have too much debt and it is more than half of your income. Trying to get another debt when things are this bad can make your situation even worse.
  • You have a poor credit score. Having a bad credit score can make it near impossible for you to qualify for debt consolidation. If you qualify, you might be tied up with exorbitant fees and interest rate.
  • You are in the midst of financial hardship such as a divorce, going bankrupt, or losing your job. Getting a debt consolidation loan under these circumstances may hurt your finances even more.

Getting a Loan to Consolidate Debt

Getting a loan to consolidate debt may be a good idea if you qualify for the loan without having to pay large fees. This means having good cash flow, a desirable debt-to-income ratio, and a certain length of credit history. If the interest rates are something that you can work with and manage to pay given your current income, then it is even better. You also need to take a look at the loan terms to make sure that it is not overly long and to know what fees you are expected to pay so you can weigh if the loan is a good decision over the long run.

Pros and Cons of Debt Consolidation – Be Debt-Free Soon!

The journey to going debt-free is a long and challenging one. You’ll have to make a lot of sacrifices and really motivate yourself in order to work towards paying off debts and going debt-free. You can start your journey by applying for a debt consolidation loan to make paying debts easier to handle. After all, the best way to make sure that you can pay off your debts is to make them easier to manage!

What is Debt Consolidation?

Debt consolidation is a financial strategy towards transitioning into being debt-free. It is a process that converts numerous smaller loans into a single loan with a single monthly payment. Oftentimes, debt consolidation also results to lower interest rate such as when high-interest debts are paid off by a lower-interest debt consolidation loan.  Because multiple loans still have to be paid anyway, converting them into a single easy-to-pay loan makes debt easier to manage and eventually fully pay off.

Pros of Debt Consolidation

Consolidating debts bundles several debts into one that requires just a single payment per month. As a lot of people who are in debt have a problem managing finances, to begin with, a single monthly payment takes off a huge psychological burden and makes repayment easier financially as well.

Debt consolidation results in huge savings over time. Most small loans have a high interest, often having interest rates that are well within 20-30% plus other fees. Debt consolidation loans can save more than half of the money that goes towards paying interest and enables you to make more payments towards the principal, resulting in being able to pay off debt a lot quicker.

Cons of Debt Consolidation

Most debt consolidation loans don’t have an introductory 0% interest rate unlike other loans such as debt transfer credit cards. This means that you will have to pay interest as soon as you start with your debt consolidation. This can be a con for most who don’t look at the long term benefits of debt consolidation.

Because debt consolidation can free up some cash, some people get tempted to spend on things they do not need instead of taking their savings and diverting it towards debt payments. Remember that if you get tempted to spend your extra cash in frivolous things, you’ll end up with more debts and more problems managing your finances.

Note that debt consolidation by itself does not eliminate debt. It only makes paying debt easier. Eliminating debt still boils down to how you handle your money and how much you set aside towards debt repayment. Hopefully, with the money saved by debt consolidation, you’ll make the right decision and use the money to pay what you owe so that you can be debt-free as soon as possible.

Remember that a debt consolidation loan will help you manage multiple debts by converting them into a single lower-interest loan with a single monthly payment. It will make managing your budget a lot easier so that you can pay off your debts even when you have bad credit. If you’re interested in consolidating debt using your home equity, contact us and we’ll be sure to answer your queries.

 

The Best Loan Options for Consolidating Debt in Canada

Using a loan to consolidate debt can be tricky because the last thing you want is to get a loan that will get you deeper in debt. What you want is to find the best loan option for consolidating debt that will perfectly suit your situation. This is possible after careful consideration of the pros and cons of each. This blog is an overview of the debt consolidation options in Canada.

Consolidate with a Debt Consolidation Loan

A debt consolidation loan is when you borrow from a finance company, bank, credit union, or lender that will provide you with funds to pay off existing loans and in effect bringing together all your debts into just 1 loan. This requires a good credit score and often requires collateral but interest rates are lower than traditional loans and will allow you to pay off your debt in 3 to 5 years.

Consolidate Debt with Debt Settlement

Debt Settlement means having an agreement with your creditors that allows you to settle your debt by paying a large sum of cash with a lower value compared to your loan. This entails contacting your creditor and offering to pay 50-80% of your debt in cash in exchange for them marking your loan as fully paid. This can either repair or damage your credit score depending on the process you followed.

Consolidate Debt Using Overdraft or a Line of Credit

You may apply for a line of credit or an overdraft from a bank to help you with consolidating debt. They usually require a good credit score, positive net worth, and a verifiable source of income but those that come with collateral may be easier to qualify for.

Consolidate Using a Debt Management Program

You can consolidate all your credit card debts into one with just 1 monthly payment via a DMP or a Debt Management Program. A downside is that this includes counselling which may put off some people but the average time people pay off this loan is just 3 years, largely because their debt counsellor really encourage them to stay on top of payments. Your creditor must approve before you can use a DMP.

Consolidate Debts with Credit Cards

It is possible to consolidate debts with credit cards such as in the case of transferring multiple credit card debts to another credit card with a lower interest rate. A disadvantage is the transfer fee but if you have lots of debts, you can also save a lot on interest over time.

Consolidate Debts Using a Home Equity Loan, a Second Mortgage or a Home Refinance

Consolidating debts using a Home Refinance, a Second Mortgage, or a Home Equity Loan all mean that a financial institution, a bank, or a private lender will lend you money by using your home equity as collateral. These loans are easier to qualify for because they are secured by your home’s value. If you’re careful, you won’t end up going through the most profound disadvantage which is possibly losing your home. Fortunately, these types of debt consolidation loans come with terms that also protect the borrower and some lenders have very friendly payment terms especially when negotiated by mortgage professionals.

Homebase Mortgages can help you get in touch with lenders and help process your application for a debt consolidation loan. Contact us for details!

 

second-mortgage-toronto

How to Effectively Consolidate Your Credit Card Debt in Canada

Do you know that at present time, there are more credit cards than there are people in Canada? TransUnion’s study says that 43 million credit cards are active in Canada and we only have a population of about 35 million. This means that the majority of people have credit card debt and multiple credit card debts mean a lot of money spent on paying for interest.

Additionally, the TransUnion study says that the average Canadian have an average of $4,094 in credit card debt with one or a few credit cards. It certainly looks like the average Canadian will benefit from consolidating credit card debt.

What is Credit Card Debt Consolidation?

Credit card debt consolidation means combining the balance of several high-interest credit cards to make payments easier to manage as well as save money on interest.

Options for Credit Card Debt Consolidation

Consolidating credit card debt can help you minimize your debt and eventually become debt-free in the future. Below are the popular credit card debt consolidation options.

Debt Consolidation Loan

A debt consolidation loan is an unsecured loan which may not be easy to qualify for just anyone because a high credit score is a foremost requirement. Another consideration is the value of the loan because financial institutions will not hand over a large amount of loan for an unsecured loan unless the borrower passed their strict screening process.

Debt Management Program (DMP)

A DMP will help you manage your loans, not just let you borrow a certain amount. With a DMP, you’ll work with a trained creditor counsellor to come up with a financial plan for you after assessing your financial situation. Each month, you’ll make payments to your credit counsellor who will pay to each credit card company you owe money to according to the terms you’ve agreed with together.

Credit Card Balance Transfer

A credit card balance transfer allows you to transfer several credit card balances to one card with a lower interest rate. The idea is that with a lower interest rate and with just a single card to pay, it will be easier and faster for you to pay off your debts.

Home Equity Line of Credit or Loan

A Home Equity Line of Credit allows you to tap your home equity to help consolidate debt if you’re a homeowner. Your home’s equity serves as collateral and the amount you can borrow is based on the value of home equity that you’ve built up. A Home equity line of credit usually has a lower interest rate compared to other credit card debt consolidation options.

Effectively Consolidate Your Credit Card Debt

All of the options for credit card debt consolidation mentioned above can help you effectively deal with your credit card balances. There are pros and cons for each depending on your financial situation and how much credit card debt you’ve accumulated. Contact us to talk to a debt consolidation expert or to apply for a home equity line of credit in Canada.

Choosing Debt Consolidation Loan Options Wisely

There are many types of debt consolidation loans to choose from, but one might be better than the other for you depending on your specific circumstances. Read on below to help you choose the best one for your needs!

But First, Why Consolidate Debt?

Paying debt can be very difficult, more so when you have to remember each one and make sure that you pay each one’s monthly payment before their due dates. Most loans also have high interest rates, so paying them off often means just trying to keep up with the minimum payment each month.

The beauty of debt consolidation is that it allows you to manage your debts easier. When you take a loan to pay off high-interest debts, you end up having just one debt to pay in the future!

Debt consolidation helps you get rid of the trouble of having multiple loan bills. Not only that, but some debt consolidation options help you save in the long run because of their relatively low interest rate.

Below are 4 popular types of debt consolidation loans that you can use to consolidate your debts.

Personal Loan

You can consolidate your debts with a personal loan if it is an amount that is large enough to cover your debts. Because a personal loan is an unsecured type of loan, you can expect to pay higher interest than other loans in this list. You will also have to make sure that you can afford the fixed payments.

A personal loan might be very difficult to get if your credit rating isn’t impeccable. Note too that because this is a high-interest loan, there is a huge possibility that you won’t be saving money in the long run.

Credit Card Balance Transfers

Credit card balance transfers work because this type of loan usually have a low interest rate, so you’ll be able to save quite a bit. The downside is that the low interest rate is usually for a certain length of time only. This means that any savings you’ll be able to get won’t be very substantial.

Note that using this method to consolidate debt can further cause your credit rating to plummet so be very careful and make sure that you read all details before signing up for a credit card balance transfe

Debt Consolidation Loans

Debt consolidation loans are loans that are offered by credit unions and banks specifically for the consolidation of debt. Their terms can vary widely but a key detail to watch out for is a longer repayment timeline because that means you’ll end up paying a lot more despite lower monthly payments.

Home Equity Loans

A home equity loan is a loan you can take using the equity you’ve built up in your home as collateral. Because this is a secured loan, you can enjoy a lower interest rate using this than using the other types of debt consolidation loans listed here. You just have to be very careful and make sure that you’ll be able to pay because choosing this means putting your home on the line. You need to be discerning and really look for a lender that’s not out to take your home.

Ready to apply for a loan to help you consolidate debt? Talk to us at Homebase Mortgages to avail of our professional mortgage services that can help you manage your  finances better!

5 Steps to Consolidate Debt

Waiting for magic and hoping your debts and bills will go away won’t happen without a little help from you. Know that although you can’t really make debt disappear, you have the power to make it easier to pay via debt consolidation.

Why Consolidate Debt?

Managing several debts with various interest rates and due dates can be very stressful. Consolidating your debts into one helps you keep track of payments faster and even opt for a lower overall interest rate. Yes, the initial step of documenting what amounts you owe and to whom can be daunting, but the long term benefits outweigh the initial effort you have to put in.

Consolidating debts is a big challenge for most people, that’s why we listed the 5 steps that you can take with the help of a financial expert to make things more manageable for you. Read about them below!

Get to Organizing

Find out what you owe and to whom. This allows you to have a better awareness of your credit status and credit rating, the crucial numbers that you’ll help improve as you pay off your debts after consolidation. Note that fees will usually be involved in this stage.

Start with contacting your credit bureaus and move to taking a detailed inventory of your debts. Take small steps. Don’t forget to keep accurate records more so when you start paying everything off.

Find Available Debt Consolidation Options for You

Depending on your area, you may seek the help of mortgage brokers to guide you in the debt consolidation process. Some options may be better for you compared to other means based on your needs and means. Private lenders, banks, or credit unions may all have solutions for you, the trick is finding the best one to avoid future problems.

Apply for a Loan

Once you already know how much you need and have picked a lender for debt consolidation, the next hurdle is actually getting approved for it. Knowing how the process work counts the most in terms of getting approved.

Make sure that you’ll be applying for a loan that will cover all your debts to avoid future issues. Choose the one with payment terms that you can afford. The last thing you want is to end up in worse financial status after this. Get a mortgage broker to go over your list and the payment terms to ensure you’re not missing anything important.

Bounce Back

Bouncing back can mean the actual process of paying for your debts or reapplying for a loan if you got turned down. If your application wasn’t approved, then note your mistakes and don’t be afraid to ask about what went wrong.

Consolidate Your Debt

Once you get approved, be sure to pay off your existing debts and use any extra money to pay the loan back. Remember that paying your debt on time will ensure you incur only the bare minimum of interest and help improve your credit rating and financial record.

Need the help of a mortgage broker so you can consolidate your debts? Contact us today! We’ll be happy to assist you towards your goal.

Consolidate Your Debts with a Home Equity Loan

Having a lot of loans can be a pain to keep tab of when it comes to making sure that you’re paying them off before each of their monthly due dates; not to mention that each loan will have dizzying interest rates that will keep on eating on your finances if the loans are not paid off as soon as possible. This is why consolidating debt is an attractive aspect of debt management.

Managing your finances will be a lot easier when your debts are consolidated. Doing so will mean that you will have fewer things to mind when it comes to bills.

The thing is, consolidating debts usually means taking out another loan, using the funds from that to pay off your other debts, and ending up with just one debt to mind. Sounds easy but can be a bigger problem if you take the wrong kind of loan. You better do your research and know which type of loan is the most advantageous for your financial situation.

Home Equity Loan to help You Consolidate Debts

Taking a home equity loan can be a great solution for managing your debts. It is a type of mortgage loan that uses your home’s equity as collateral. The amount that you can borrow from this loan is determined by a percentage of your home’s equity and the terms of the mortgage company or private lender that will be providing you with the loan.

Because a home equity loan is a type of mortgage, the interest rates will be far better than other types of loans that you can get from a bank or other lenders such as a credit card, a personal loan, or an unsecured debt.

Will It Be Smart to Use a Home Equity Loan to Consolidate Debt?

As long as you can pay off the minimum payments set by the lender, you’re not in a hurry to sell your home anytime soon, and you’ve got considerable debts with huge interest rates that will benefit greatly from being converted into just one loan, then the answer is yes.

Think about it, if the interest rates of your existing loans are so expensive that you’re often simply paying for the interest each billing period, you’re basically throwing money away and will end up paying a total of twice or more the value of your original loan by the time you pay it off. That couldn’t be good. If you use a home equity loan to pay off your current loans, you will still pay some interest, of course, but it will be nowhere near what you are currently paying now.

There is one thing you have to be really sure of before getting a home equity loan. You have to be sure that the terms you agree to will give you a monthly bill that you can afford to pay. Note that failing to pay the minimum amount on time could mean losing your home to the lender. If used correctly, though, a home equity loan can improve your financial position significantly.

Interested in applying for a home equity loan but is not sure how to go about it? Contact us at Homebase Mortgages for professional assistance with your home equity loan application.

8 Benefits of Converting Your Credit Card Debt to a Home Equity Loan

Holding on to debt via a credit card or several credit cards is not really a wise choice because of the sky-high interest rates, not to mention that trying to keep track of payments can be quite a chore if you have a few cards. Credit card debt consolidation by transferring your credit card debts to a home equity loans means that you’ll have fewer debts to manage! Find out what the other benefits are below!

Save Money on Lower Interest Rates

This is by far, perhaps the most convincing reason on why transferring your credit card debt to a home equity loan is a great idea. Credit card interest rates can go between 19% to 28%, depending on how diligent you are when it comes to payments. In comparison, home equity loans would typically have an interest rate that is less than half as that for credit card debts. This can mean a few thousand   of savings per year!

Lower Minimum Payments

Because home equity loans are interest only (for the most part), minimum payments are also significantly lower compared to credit card debts.

Flexible Payments

Home equity loans are pretty fluid in the sense that you can opt to pay just a part of your debt, just pay the minimum, or pay in full if you have extra funds. This enables you to reduce your debt quickly if the opportunity arises and also allows you to just pay what you can when you’re strapped for cash.

Reduce Debt Fast

Because the interest rates are lower and the payments are flexible, you can pay off a home equity loan faster than a credit card loan. This is also partly because more of payments are going towards paying off what you owe and not just going to a bank’s pockets.

Statistically speaking, if you are to pay the same amount to a home equity loan as compared to a credit card debt, you will only have paid 20% of your credit card debt after 5 years whereas that equates to having paid 60-80% of your home equity loan after the same span of time.

Keeping Things Simple

Fewer loans to keep track of means fewer bills and less probability of missing deadlines for payments. One of the beauties of using a home equity loan is debt consolidation.

Credit Score Improvement

When you are able to pay debts on time and keep track of all payments, your credit score is likely to improve. More so, the lower interest rates and being able to pay off the loan sooner can help turn your bad credit to good credit in a shorter span of time.

Easier to Get Than a Personal Loan

Because a home equity loan is backed by your home’s equity, lenders are more apt to grant it because they view it as an investment. This also explains the lower interest rates because home equity loans are viewed as secure investments whereas personal loans are viewed as a risk.

Better Than Another Credit Card

Transferring your current debt to another credit card is one way of reducing your average interest rate, but this will only reduce it by a few percentage points at the most. More so, credit card companies also charge a fee when you transfer your debt from one card to the next so you are not really saving any money in the end.

Want to apply for a home equity loan? Contact your trusted team of Toronto mortgage brokers today and save both time and money in paying off your credit card debt!