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Do you have credit card debt, auto loan payments, and medical bills among others? Have you ever wondered if you could pay your debts all at once? Imagine if you could. It wouldn’t be such a hassle to write checks with different amounts for different merchants or institutions. You will just write one check, deposit, or transfer money at once, yet pay all the debts you owe.
Well, you will be able to do this if you consolidate your debts. Debt consolidation means you can combine all your debts so you will be able to pay once monthly. With debt consolidation, you can be able to avail of a much favorable interest rate or term.
How does debt consolidation work?
We all know that each credit card debt, auto loan debt, or any other loan has its own interest rate, contract, and payment duration. When you consolidate your debt, you get a new loan that pays off all your other unsecured loans. Apart from the fact that all your debts are now easier to pay off, you can save more money over time with its lower interest rate. You can also get out of debt faster and easier with its flexible terms.
What are my debt consolidation options?
There is a wide array of options for you if you want to consolidate your debt. First of all, you can simply go to any banks or lending institutions and find the one that offers the best rate for you. Just remember that they have stricter regulations and requirements. So, if you have a not so impressive credit or if you don’t meet their minimum requirement, you might reconsider going to the banks.
If your bank or your lending institution rejects your application for a debt consolidation, you can explore the services of private mortgage lenders. There are a lot of private mortgage companies in Canada that could address your need to consolidate your debt. They can offer a more appealing interest rates and shorter payment terms. Apart from that, they are not too tight on their requirements. Even if you have a bad credit or a high debt to income ratio, they can find terms that are more suitable for you.
Another option you have is to consolidate your debt using a second mortgage. When you apply for a second mortgage, you can use the equity of your home as a collateral. You can then borrow a large amount of money from a lender. Some would even let you borrow of up to 80% of your home’s value. When you have the money, you can now have more time to arrange the consolidation of your debts.
One of the advantages of getting a second mortgage is its lower interest rates. You can use this advantage to consolidate your debts since most credit card companies charge 10% or more as interest. The only downside of using your second mortgage to consolidate debt is the fact that your house is considered as its collateral. The moment you default on your monthly payment, you also risk losing your house. So, when you use this option, always remember to consistently and regularly make your monthly payments on time.
Am I ready to consolidate my debt?
If you feel that you are a little overwhelmed with all the pros and cons of consolidating your debt and still unsure if you should go for it, you should do your own research. Ask banks, lending institutions, private lenders, and financial experts in Ontario. Always remember that the best time to consolidate your debt is when you know what you are doing and when you recognize that debt consolidation is a responsibility.