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Refinance Your Mortgage to Pay Off Debts With Debt Consolidation

Posted by samanthas on May 26, 2012 in Home Living Tips with No Comments


Many Canadians have multiple loans that they are paying each and every month. Many of these loans are charged at a high interest rate, which means a lot of the money you are paying on these loans is going towards interest rather than outstanding principle. Debt consolidation can help you save thousands of dollars in interest by using the equity in your home to combine all your loans into one monthly payment at a lower interest rate.

What is Debt Consolidation?

Consolidating your debt involves the process of replacing all your outstanding debts with one manageable loan. Canadians are able to borrow enough cash in one home equity loan in order to pay off all other outstanding debts. For example, you may have a car loan, credit card debt, and student loans that you are making payments on. Rather than having multiple loan payments, you can consolidate them all into one convenient and easy to manage loan. In this situation you would only be making one payment per month rather than multiple payments at varying interest rates.  The payment amount is generally lower, which can also help with cash flow.

 

What Are the Benefits to Consolidating Your Debt?

You may consider this type of consolidation for a variety of reasons, including:

  • Lower interest rates on the one loan, rather than higher interest rates on other outstanding loans;
  • Lower payments due to extended terms on the debt consolidation;
  • Reduction in payments with one easy to manage monthly payment;
  • Free up cash flow by spending less on interest.

Considering the fact that interest rates on mortgage loans have been extremely low in the recent years, you could potentially save quite a bit of money every month by using the equity in your home, if you qualify – which is charged at a lower interest rate – to replace all your other loans that are most likely being charged a very high rate. Credit card and store card debt especially is charged at extremely high rates. By paying off this high interest card debt with your home equity or other consolidation loan, you can even free up some cash flow by utilizing one lower interest home equity loan to pay off all your other outstanding debt.

A home equity line of credit is another great option, where you have credit available to you up to a set limit.  You can borrow and pay back as needed and only pay interest on the amount you have actually borrowed.

If you are one of the many Canadians who have a variety of outstanding loans at very high interest rates, you may be able to take advantage of debt consolidation. Call a knowledgeable mortgage agent like Lee Anne Taylor and see how she can help you save money by lowering your monthly payments.  She can show you all the options available to use the equity in your home to reduce interest payments and improve cash flow.

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