​What is Debt Consolidation?
Debt consolidation is when high-interest debts are transformed into low-interest debts
Debts such as credit cards, car loans, student loans, personal loans are paid off by a home equity line of credit loan.
It can be tiresome and a never-ending process when trying to pay off high-interest debt such as a credit card. In most scenarios, the only thing you are paying towards is the interest, which is barely making a dent in the principal amount owed.
This is a never-ending loop, as most people are stuck paying only the interest portion month after month. The credit card companies especially love clients who only make their interest payments month after month and can never pay the amount owed in full. It's an ongoing cycle of borrowers being squeezed for their last dime by credit card companies.
Missing a single payment can make your credit scores drop so low that you would not qualify for any other loans.
Debt consolidation on the other hand can save borrowers tens of thousands that they would have normally paid towards unnecessary interest payments and increase your credit scores at the same time as you make regular payments month after month.
Once a borrower receives a debt consolidation loan, they would use that loan to pay off all other existing loans and carry a single low-interest loan instead. Every month one single payment would be made towards the loan amount. The amount paid monthly would be a lot lower than the combination of the other loans. Lower interest rates make it possible for the borrower to pay the loan down over a period of time and would eventually bring the loan amount to zero.
How does it work?
Debt consolidation loans use the equity that borrowers have built up in their homes or properties. This, in turn, allows for borrowers to use that equity in the form of a Home equity line of credit also known as a HELOC. Once a borrower receives the HELOC, they would pay all other debts with the HELOC and carry only one low-interest loan. HELOCs have many benefits one being the low-interest rates that give the borrower the breathing room they need to make their smaller monthly payments in full and on time.
Here are some of the advantages of the Home Equity line of credit (HELOC)
One of our mortgage experts at Toronto Private Mortgage will help you create a repayment plan creating a customized financial plan for you.
Debts such as credit cards, car loans, student loans, personal loans are paid off by a home equity line of credit loan.
It can be tiresome and a never-ending process when trying to pay off high-interest debt such as a credit card. In most scenarios, the only thing you are paying towards is the interest, which is barely making a dent in the principal amount owed.
This is a never-ending loop, as most people are stuck paying only the interest portion month after month. The credit card companies especially love clients who only make their interest payments month after month and can never pay the amount owed in full. It's an ongoing cycle of borrowers being squeezed for their last dime by credit card companies.
Missing a single payment can make your credit scores drop so low that you would not qualify for any other loans.
Debt consolidation on the other hand can save borrowers tens of thousands that they would have normally paid towards unnecessary interest payments and increase your credit scores at the same time as you make regular payments month after month.
Once a borrower receives a debt consolidation loan, they would use that loan to pay off all other existing loans and carry a single low-interest loan instead. Every month one single payment would be made towards the loan amount. The amount paid monthly would be a lot lower than the combination of the other loans. Lower interest rates make it possible for the borrower to pay the loan down over a period of time and would eventually bring the loan amount to zero.
How does it work?
Debt consolidation loans use the equity that borrowers have built up in their homes or properties. This, in turn, allows for borrowers to use that equity in the form of a Home equity line of credit also known as a HELOC. Once a borrower receives the HELOC, they would pay all other debts with the HELOC and carry only one low-interest loan. HELOCs have many benefits one being the low-interest rates that give the borrower the breathing room they need to make their smaller monthly payments in full and on time.
Here are some of the advantages of the Home Equity line of credit (HELOC)
- Higher monthly debts are transformed into one single low monthly payment with lower interest rates.
- Home equity line of credit can help increase credit scores a lot faster than if you were to use just credit cards on their own.
- It is important to never miss a single payment and not use more than 30% of your available credit. High credit scores can get you approved for the lowest mortgage rates available.
- Access to more money - with less spent on the associated interest rates that come with debts, borrowers have access to more money than they did before consolidating all of their debt.
One of our mortgage experts at Toronto Private Mortgage will help you create a repayment plan creating a customized financial plan for you.