Debt consolidation can be a helpful tool for managing and paying off multiple debts. It involves combining your debts into a single monthly payment, often with a lower interest rate. This can make it easier to track and pay down your debt, and can potentially save you money in interest.
Some Canadians may explore using a home equity line of credit (HELOC) for debt consolidation, using the equity in their home to secure a loan with a lower interest rate.
For example, Mary has $20,000 in credit card debt, a $5,000 car loan, and a $200,000 mortgage. She has built up equity in her home and decides to take out a HELOC. She uses the HELOC to pay off her credit card debt and car loan, consolidating them into her mortgage payments at a lower interest rate. This simplifies her payments and saves her money on interest.
Is Debt Consolidation Right for You?
Debt consolidation can be a helpful tool for managing and paying off debt, but it might not work for everyone. If you’re considering debt consolidation, it’s important to weigh the pros and cons carefully.
Pros of Debt Consolidation
- Lower interest rates
- Simpler monthly payments
- Can help you get out of debt faster
- Can improve your credit score
Cons of Debt Consolidation
- May require a credit check
- May have fees associated with it
- Can be tempting to take on more debt
- If you are using your home as collateral (HELOC) it can be risky if you can’t keep up with payments
Connect to a Local Mortgage Broker
If you’re thinking about debt consolidation, it’s important to talk to a mortgage broker to see if it’s right for you. They will be able to evalute your cuttent situation and advise on potential solutions.
If you would like to get connected with a Canadian mortgage broker that is licences in your area, go ahead and complete the form below.
