🕛 3 minute read
If you are a Canadian living in debt, you are not alone. So how can one ever get out of debt? Debt consolidation.
What is debt consolidation?
Debt consolidation means paying off smaller loans with a larger loan at a lower interest rate. For example, a credit card bill debt with interest of 19.99% can be paid off by a 5-year Mortgage loan .
A lot of confusion surrounds debt consolidation; many of us just don’t know enough about it. Consider the two sides:
- The lower the interest rate, the sooner you get out of debt. A lower monthly interest allows you to pay more towards your actual loan, getting you debt-free faster.
- You only have to make one monthly debt payment. This is more manageable than keeping track of multiple debt payments with different interest rates.
- Your credit score remains untarnished because your higher interest loans, such as a credit card, are paid off.
- Consolidating your debt doesn’t give you the green light to continue spending.
- Consolidating helps you get out of debt; continuing to spend as you did before puts you even further into debt.
- A larger loan with a financial institution will require prompt payments. If you were struggling to pay your debts before, you may still be challenged with payments.
- You may require a co-signer who will have to pay the loan, if you’re unable.
So how do you know if debt consolidation is the option for you? Refinancing or a Reverse Mortgage (for Canadian Homeowners 55+) could be great options. Get in touch and I can help you determine the right solution.
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