Is Debt Consolidation Right for You?

Business & Finance

Do you know what makes up the majority of revolving debt for most consumers? Credit cards

Probably not a surprise, but the appetite for credit cards continues to grow, and it shows no signs of changing.

For many, debt gets to a point where is suffocates you, it becomes overwhelming, it controls you and becomes a major point of stress. It could even replace another four letter word we often hear. Debt, when left unmanaged, is toxic and can bring individuals and families crumbling to their knees. But, there is a choice and there is a solution, if you are willing to face the facts and conquer your fears. If you are looking for a solution, a debt consolidation mortgage may help you get back on track provide the peace of mind you deserve.

What Is A Debt Consolidation Mortgage?

A Debt Consolidation Mortgage is a way for you to take your high-interest credit card debt and other debt and combine it into one monthly payment, together with your existing mortgage or as a separate mortgage. But, just because it sounds good, doesn’t mean it is. You must be certain that the new structure will not only improve cash flow, but also does not take so much longer to pay off the debt that it nullifies all of the savings.

Regardless, if you’re paying on multiple credit cards and only making the minimum payments each month, your interest is going to add up and debt reduction to any significant extent is virtually impossible. Typically, consolidating your high-interest debt allows you to make one monthly payment, save money in interest and pay off your debts in a shorter amount of time.

How Should You Prepare For Debt Consolidation Loan?

Credit

When you apply for a debt consolidation mortgage, the lender is going to check your credit report and score, so it’s a good for you to have a handle on where you stand. If there is anything you can do to enhance your credit in advance, you will have more leverage on the interest rate and other terms of the debt consolidation mortgage. The better your credit, the higher your chances of securing the best rate.

Check for inaccuracies and errors

You have the right to dispute any inaccuracies and errors on your credit report. If there’s inaccurate information or something on your report that does not belong, take it up with the credit reporting companies (Equifax, TransUnion). Ultimately, inaccurate information on your report may be holding you back from a better interest rate.

Timely payments

Paying your bills on time, every time will help your credit. Even if you can only make the minimum payments, it’s extremely important that you make your payments on time.

Is debt consolidation right for you?

Debt consolidation isn’t right for everyone. Figure out the current and post scenarios to see if a debt consolidation loan will work for you. You’ll also want to be sure to read the fine print – there may be fees attached to the loan you that you didn’t know about. You must factor in the interest rate, and all fees to determine your savings, if any. You must also calculate how long it will take you to pay off the debt consolidation mortgage vs. how long it would have taken you to pay off the existing debt. Remember, if an offer sounds too good to be true, it probably is.

Whether you choose to entertain a debt consolidation mortgage or not, you need to make sure you have a game plan for how you’re going to get out of debt. You need to know where your money is going each month and make a plan to get your debt paid off in a reasonable time. Doing nothing is not an option.

What Now?

Instead of letting your mortgage continue to be part of the problem, you can make it a key in your plan to get out of debt. How?

Mortgage rates are currently very low. This means you can roll your debt into your mortgage and pay a much lower interest rate. It’s a type of cash-out refinance where you use the existing equity built up in your home to pay off debts.

The Benefits of Debt Consolidation:

  • Multiple payments and creditors into one manageable payment
  • Can reduces higher interest rates
  • Can brings credit cards and other debt to zero
  • Lowers the amount of interest you pay
  • Improves your credit rating

When to Consolidate

  • More than 10 percent of your take-home pay goes for non-mortgage debt (including credit cards, student loans, car loans and personal loans)
  • You struggle to meet your monthly payments
  • You have been unable to invest in a savings plan
  • You have debts carrying an interest rate of 10 percent or higher
  • Mortgage rates are lower than rates on your other financing options

If you have debt that’s bothering you, remember to look at all your options. It may be easier than you thought to get out of debt. For more info on debt consolidation and cash-out refinance, give us a call or send us an email.

Have any questions, need any advice? Visit us at www.thefinancialforum.ca. Email us at mortgages@thefinancialforum.ca. Call us at (905) 265-0246.

VERICO The Financial Forum Ltd.

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