Advantages of Debt Consolidation Loans in Canada

Debt consolidation loans are increasingly becoming popular, but what benefits can you get if you decide to apply for a debt consolidation loan in Canada?

Debt Consolidation Loan

A debt consolidation loan is a type of loan that an individual with a lot of various loans can apply for in order to convert multiple loans into 1 easier-to-manage loan. People apply for a debt consolidation loan because having just 1 loan to think of means it is easier to keep track of and pay, not to mention that most types of debt consolidation loans offer lower interest rate than other loans such as personal loan, credit card loan, and car loan. An interest rate difference of just 1% can mean saving thousands of dollars down the line.

Advantages of Debt Consolidation Loans

There are many benefits of debt consolidation loans. They are:

  • Easier to fit into one’s budget because there is only 1 monthly fixed rate payment
  • With a set time frame
  • Usually with a lower interest rate, saving you a lot of money
  • With a lower monthly payment

Get a Debt Consolidation Loan in Canada

You can contact various lenders to apply for a debt consolidation loan. The key to getting approved is to communicate that you’ll be able to pay. Note that lenders are usually looking for the following:

  • Your monthly expenses and budget to show that you can pay loan payments
  • Evidence of enough income to make payments such as pay stubs or pay slips
  • Extra layer of security such as having collateral or having a co-signer

Once you have the above, you can apply for a debt consolidation loan from a bank or other lenders. Note that whoever you apply to, they’ll look at your credit score, your employment status, and your debt service ratio because they will want to make sure that you have the capacity to pay off your loan.

During the loan application process, you must make sure that the following are ready:

  • Your recent pay stub or any proof of income
  • Your recent income tax assessment
  • Your current bills and debt statements
  • Any document that can prove you have assets (if applicable)

Risks for Debt Consolidation Loans

Understand that getting a debt consolidation loan will only work in your favour if you will use it as a tool to help you pay all your debts. It is not a perfect solution unless you are willing to work with it because it is still a loan that you will have to pay off. What it can do for you is to make paying your debts a bit easier and to save you from a financial crisis due to not being able to afford the high interest rates most loans have.

Some debt consolidation loans require a collateral. That means that you can lose whatever you use as collateral if you are unable to honor the terms of your debt consolidation loan. For this reason, it is best to seek the help of loan and mortgage professionals if you want to get a debt consolidation loan. Contact us at Mortgage Central Canada if you have questions or need assistance getting a loan.

10 Things You Must Know About Second Mortgage in Canada

Getting a second mortgage in Canada is not just becoming more popular, it might also become the norm in the years to come. Whether or not you’re planning to get a second mortgage in the future, now is the best time to familiarise yourself about some details so you can make the right decision in the future.

Second Mortgages Come in Many Forms

Basically speaking, loan products that use home equity can be considered a second mortgage. Notable examples are HELOCs and home equity loans. The type of second mortgage that you have to apply for is the one that fits your needs and ability to pay.

A Second Mortgage Uses Your Own Money

When you apply for a second mortgage, you are basically applying for a ‘loan’ that uses your own money. You have to be careful though, as tapping your home equity means placing your home on the line if repayment does not go as planned.

Private Lenders May Be Better Than Banks

For most people, qualifying for a second mortgage from a bank is near impossible, but private lenders often have looser qualifications that make it easier for those who are self-employed or those with bad credit to qualify.

Second Mortgages Are Used for Huge Expenses

Because this type of mortgage gives the homeowner access to their home equity, second mortgages are often used for debt consolidation and for paying for home renovation. This is to take advantage of the lower interest rate that second mortgages have compared to most other loans.

You Can Borrow A Lot or Borrow As Little As You Need

Different loan products have varying minimum loanable amount and maximum limit. When you qualify, you may borrow as little as you need or as much as you want within these parameters. Go for a HELOC for smaller recurrent loans or apply for a home equity loan to access a lump sum of funds.

Interest-Only Payments Are Possible

Some types of second mortgages allow for interest-only payments, making them easier to handle for your wallet.

A Second Mortgage Can Be Used for Anything

Once your loan is approved, you can use it for almost anything! Some people use it to finance a business, some to pay for home improvement, some for expensive university education, some for a dream car or vacation, and some to buy another property. As long as you pay within the terms, you can use your loan any way you want.

It Is Not Free

Aside from the interest rate, second mortgages come with fees. These fees may vary from lender to lender so be sure to talk about this detail with your mortgage professional.

Interest Rate Varies A Lot

Just as the fees vary from one lender to another, the terms and interest rates vary as well. A mortgage professional can help you compare interest rates between lenders so you can save some money too.

You Can Repair Bad Credit with A Second Mortgage

By using a second mortgage to consolidate loans, you can pay off other loans while getting lower interest that will be easier for you to pay off as well.  As you do this, your credit score will repair itself soon enough.

Thinking of applying for a second mortgage? Contact us at Mortgage Central if you have mortgage questions!