How to Consolidate Debt and Start the New Year Fresh

2016 is fast approaching, and that usually means setting goals for the year ahead and making plans to get certain things back on track. For many Canadians, this means taking a good, hard look at finances and often attempting to take control of unruly debt by consolidating it. Often the first thing people wonder when considering this option is how to consolidate debt to best suit their own needs.

There are different ways to consolidate debt depending on your credit, assets and cash flow. Each offers its own pros and cons. If you are considering debt consolidation to help start 2016 on fresh financial footing, here are a few of the most popular options:

Mortgage Financing

Mortgage financing usually means taking out an additional mortgage alongside the one you currently have.

·         Pros: One low payment, lower interest than a loan or line of credit.

·         Cons: Expensive closing costs, uses up equity, stretches out debt repayment over a really long time, harder to get for those with bad credit, home ownership a prerequisite.

Personal Loan/Line of Credit

This option usually involves heading to the bank or a private lender and taking out a personal loan or line of credit to consolidate.

·         Pros: Usually easy to get compared to a mortgage, not a long process, no upfront fees to borrow.

·         Cons: Generally higher interest rates, and if revolving can become a temptation that is hard to resist for many.

Consumer Proposal

·         Pros: One payment, no interest, stops collection action, reduces debt, often a lower monthly payment

·         Cons: Temporary impact to credit.

Bankruptcy

·         Pros: One payment, significantly less debt, stops collection action, no interest

·         Cons: Reporting obligations to the trustee, impact to credit, the amount to be repaid in bankruptcy can change – for example, if you make more money or acquire something the trustee can ask you to repay more surplus income.

When debt consolidation seems like the best route to take to re-establish your finances and achieve financial stability, these may be the options you consider. Each of these has some important advantages, and the choice will largely depend on your own circumstances and future goals.

Our best advice - get professional advice. A financial consultant with experience helping people regain their financial footing is the best person for the job - take advantage of their knowledge and expertise and get a plan in place that helps you achieve your goals.

Want advice you can trust? Call DebtCare Canada today at 1-888-890-0888. We can help you get ready for 2016!

Debt Relief 101: Refinance Your Mortgage to Consolidate Debt

When your debt begins to climb at a rate that seems to be spiraling out of control, or if you are just tired of shelling out money without seeing totals decrease, it might be time to consider a different approach. Making minimum monthly payments is not actually going to get you out of debt – and realizing this, many Canadians have chosen to refinance their mortgages as a way to consolidate debt – but is this the right option for you?

There are several reasons why refinancing your mortgage to consolidate debt can be a smart option. Firstly, because you are consolidating you are getting rid of that laundry list of monthly payments and consolidating them into one, tidy payment. This can make keeping track of payments far easier – and less stressful. Secondly, you can save huge on interest. If you are carrying a number of different credit products, all with varying interest rates, all applied at different periods, you are paying out far more than if you have one larger total at a single interest rate. 

With these major positives, there have to be some negatives, right? Well, as appealing an option as mortgage refinancing may be, its benefits are only open to those who qualify. What do we mean? Well, since mortgage refinancing requires upping the lending limit on your current mortgage, you have to actually have a mortgage to qualify (so renters are out). You can’t get a mortgage to consolidate debt, so unless you own your home, this option is not available.

Another issue that many have when attempting to refinance is the fact that your credit needs to be great – but if you are maxed out or have missed payments, the lending institution isn’t necessarily going to have much faith in your ability to repay your debt. Yet another deals with the fact that stricter CMHC lending guidelines have decreased the total refinancing limit to 80% of a home’s value, so if your debt will put you over this threshold, a total consolidation is not feasible.

So, is mortgage refinancing to consolidate debt the best option for you? Despite the downsides associated with qualifying, if you can secure funding it may very well be the most intelligent option. It is also better for your overall credit versus a consumer proposal or bankruptcy – so that is also very attractive.

When you are considering the various options available to get out of debt, mortgage refinancing is one that should be on your list – just be prepared if your credit isn’t stellar or if there is no equity in your home.

For more about mortgage refinancing to consolidate debt please contact DebtCare by calling 1 (888) 890-0888.