What You Have to Know About Credit Card Debt Consolidation in Canada

Canada has about 43 million active credit cards at present time according to TransUnion. This huge number of credit cards for Canada’s population of 35 million means that people who do have credit cards have multiple ones, which means that there is an increased probability of them having issues with paying their credit card debt on time.

Why Go Through Credit Card Debt Consolidation?

The above is supported by the fact that an average Canadian has a credit card balance of about $4,100. From this data, it can’t be denied that having credit card debt is a typical problem most Canadians have. Fortunately, credit card debt consolidation is a lot easier to pull off these days as compared to years before.

Credit card debt consolidation is a solution for managing multiple credit card debts to make them easier to pay and manage. It works by combining several credit card debts into one loan with a lower interest rate. By having only a single bill with a lower interest rate to pay, it will be much more doable to pay on time and get loans fully paid off faster.

Options for Credit Card Debt Consolidation

In planning for a debt-free future, you have to make sure that the credit card debt consolidation option you pick is the one that will work best with your financial situation. Read more below!

  • An Unsecured Personal Loan is quite common but can be very challenging to qualify for plus come with relatively high-interest rate compared to other credit card debt consolidation options.
  • A DMP or a Debt Consolidation Program is great for those who need consistent guidance throughout the time they’re trying to go debt-free but will probably not be a good option for those who are more independent or those who have time to go on scheduled meetings with a debt counsellor.
  • A Credit Card Balance Transfer just transfers debt into another credit card with a lower interest rate to allow you to save on interest as early as possible. However, this comes with a fee which may or may not be worth it depending on the money you’ll save on interest. You can save more if you’re able to work with lenders that offer very low transfer rates if you know who to approach and when. 
  • A Home Equity Line of Credit or a Home Equity Loan for debt consolidation is easier to qualify for because these types of loans are secured by the equity of your home. Some lenders will even lend to homeowners who are self-employed or those who have a poor credit rating. Home Equity Loans and HELOCs also allow you to access larger sums of cash if you have a large enough home equity.

Benefits of Credit Card Debt Consolidation

Consolidating credit card debt not only saves you money in the long run but can substantially improve your finances right away. With time, it can also improve and repair bad credit score. If you’re looking for help with credit card debt consolidation, contact us so we can save you time and money by guiding you with making the right choice at Mortgage Central Canada!

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.

Introduction to Debt Consolidation in Canada for Retirees

Living on a fixed income can be very financially stressful with the ever increasing cost of everyday living. Are you aware that Canadians over 65 have been getting more in debt lately? This data was shared in a September 2017 report by Equifax Canada and could be a significant factor why more retired Canadians are turning to taking loans for debt consolidation to help them with managing their finances.

What is Debt Consolidation?

Debt consolidation is a way to reduce the amount of money you pay for interest on a monthly basis by turning multiple loans into one that typically comes with lower interest as well as more convenient single-bill monthly payments. Would’t it make your life a lot easier if you only have one loan bill to pay instead of several?

Debt consolidation with a home equity loan will allow you to accomplish the above while making use of your home equity in a smart way!

Why Consolidate Debt?

Debt consolidation in Canada is done for many reasons which include the following:

Get rid of the stress associated with paying payday loans.

It is not a secret that elderly Canadians go for payday loans to get by when they have unexpected bills. The problem is that they usually end up taking another payday loan the next month to try to make it until the month after because of high-interest.

Paying overdue bills

Unpaid bills can severely damage credit score and accrue penalties or fees, not to mention that they can be very stressful. Paying overdue bills with the use of debt consolidation loan can help you regain financial stability faster.

Manage other loans better

Manage high-interest loans such as some lines of credit, personal loans, and the like by paying them off and saying goodbye to having to pay their rates per month. Imagine saving money on interest and instead, your money actually going towards the payment of your debt.

Eliminate credit card debt

Credit card debt has a tendency to accumulate and get even bigger as the interest gets added up to the total monthly. Paying them off is a smart move.

Get to own your expensive purchase outright

Be it a car or a state-of-the-art home addition, buying things on credit or amortization basis can wreak havoc on your finances if not kept in check. Paying for them with a debt consolidation loan means you won’t have worry about future bills and getting to own your prized purchase right away.

Be able to afford more things in life

Because debt consolidation can save you hundreds of dollars per month in terms of interest saved, you’ll be better prepared to handle unexpected expenses with your new savings or even save up for a dream vacation. That’s called making money work for you!

Looking for a way to reduce financial stress? Debt consolidation might be the right financial solution for you! If you own your home and willing to talk about ways to tap your home equity, contact us and we’ll be happy to discuss your options!


How to Use Your Home Equity to Consolidate Your Debt

Debt in Canada has reached a record high. Canadians now owe $1.7 for ever $1 of disposable income, as shared by Statistics Canada. These numbers are alarming and it is a consolation that our housing market is strong. You might love to know that there’s a huge possibility that you’ve built up more equity than what you initially thought.

Equity built up in your home can be used to help you get out of debt if you use it the smart way. It isn’t easy to get out of debt when you’re simply trying to stay afloat keeping up with paying high interest consumer debts like credit cards and auto loans. Why not borrow your home equity to consolidate your debts then?

Why Borrow Your Home Equity?

It sounds counterproductive to borrow money to pay off debt, but know that using your home equity to consolidate debt means swapping huge interest-rate debts for one with very low interest rate. It helps too that once you do this, you’ll only have one easy monthly payment to think of instead of trying to track several.

Consolidating debts using home equity isn’t a new concept, but not many are aware of the different ways this can be achieved. We’ll talk about those ways below.

Apply for a Second Mortgage

A home equity loan, also called a second mortgage, is one of the easiest ways for you to use your home’s equity for debt consolidation. It will also allow you to use up to 85% of your property’s appraised value minus any outstanding mortgage balance from your first mortgage.

Getting a second mortgage will enable you to get a fixed amount of money that you can pay for a fixed amount of time as stated in your loan. It doesn’t replace your first mortgage so you’ll be responsible for making 2 payments per month once approved but the benefits are immense!

The interest rate of a second mortgage is really low so most of the payment you’ll be making will go towards the repayment of the loan. Compare that with credit card interest of about 30% and you can see that by not consolidating you are actually paying nothing but the interest in your credit card.

Get a Home Equity Line of Credit

Applying for a HELOC to use your home’s equity for debt consolidation is another smart move. It is different to a second mortgage because this one doesn’t give you access to funds in a lump sum, rather this gives you a limit as to how much of your home’s equity you can use. You are free to use as little or all of that limited amount at any given time.

Because of the revolving credit nature of a HELOC, you are free to use a huge chunk of it to consolidate debt, pay off a portion of that, and take out small amounts for emergencies and the like. This option gives you more flexibility and freedom as compared to a second mortgage.

Try a Traditional Line of Credit

A traditional line of credit could be great but know that it is very challenging to qualify for. You’ll need an impeccable credit history and possess a great credit score. We all know that most of those who have a lot of loans don’t have that, to begin with.

Need more information about how you can effectively consolidate debt? Contact us and we’ll be sure to discuss possible mortgage related financing options for you.