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stressed caucasian couples holding credit cards an 2021 10 27 19 49 19 utc minIf you are one of the many Canadians that is struggling with high interest consumer debt, you know how overwhelming it can feel. It may seem like there is no way out. Getting out of debt can be a real challenge, but there are strategies that can help to make it easier. One such strategy is debt consolidation.

What is debt consolidation?

Debt consolidation is when you take all of your high interest consumer debts and take out a loan to pay them all off at once. You still have the same amount of debt at this point, but it has been consolidated – and with a loan that has a much lower interest rate than your were previously paying.

Debt consolidation has several advantages. A lower interest rate means that even if you continue making the exact same amount of payments on your debt each month, you will be paying down the principal faster and you will get out of debt sooner. Lower interest rates could also mean that you may be able to reduce your debt payments each month to make your finances more manageable.

Finally, because you only have one creditor to pay now instead of multiple creditors, making your payments becomes more convenient and you are much less likely to forget someone or miss a payment.

How can I consolidate my debt?

When it comes to debt consolidation, there are a few different options that you can consider. If you are a homeowner, then borrowing from your home equity is usually one of the best options because you can likely borrow a fairly large amount of money and a very low interest rate. (Most lenders will let you borrow up to 80% of your home equity).

Your options for borrowing from your home equity are as follows:

  • Second mortgage – with this option, you get a lump sum loan against the equity in your home. The interest rate is usually slightly higher than that of your first mortgage.
  • Mortgage refinance – with this option, you break your first mortgage and get a new one for the original amount plus the amount of cash you need to borrow to consolidate your debt. With this option, you’ll likely get a better interest rate than you will on a second mortgage, but there will be a financial penalty to pay for breaking your first mortgage.
  • Home equity line of credit (HELOC) – this option is a revolving line of credit that works more like a credit card than a regular loan. This option is most suitable for smaller amounts of consumer debt and for those who know that they have the self-control not to overextend themselves with borrowing.

If borrowing from your home equity is not an option for you, the other option for consolidating your debt would be to get an unsecured loan. This type of loan is not tied to your home equity and will have the highest interest rates of all the choices. (But it can still save you money and help you to get out of debt faster).

Contact Akal Mortgages today

Did you know that a professional mortgage broker can help you with all of these debt consolidation options? Contact us today to speak to one of our brokers.

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  • Jas Bath

    The experience with AKAL Mortgages Inc. is great!!! I recently got approved for a business loan thought them and the agent that helped me with the process was outstanding. I am impressed with the convenience and very helpful service. I hear their agents on the radio all the time making consumer aware of the options available about mortgages and loans. And, they way they do, touch my heart. So honest and ethical.

  • Oli Rubion

    My wife and I visited AKAL mortgages Inc. due to their reputation in the market. We were attended in a timely fashion to discuss our mortgage and line of credit needs. We are so glad that we were provided with great options and solutions to choose from. We are very happy and satisfied from the services provided by AKAL mortgages Inc. We definitely recommend their services to our family and friends.

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