If you are one of the many Canadians that are struggling with high-interest consumer debt, you may be thinking about a debt consolidation loan. But is this really a good idea?
Debt consolidation loans can take many forms, ranging from personal lines of credit, to home equity loans to refinancing. The idea is to take all of your high-interest debt and consolidate it into one loan with lower interest. This allows you to pay off your debt faster, reduce your monthly payments, or both.
Advantages of Debt Consolidation Loans
In theory, it makes a lot of sense to consolidate your debt using your mortgage. If you have built up equity in your home, you can use this equity to help ease the burden of your consumer debt. Especially if you are to the point where you are having difficulty paying your monthly bills, consolidating debt can help you free up cash so that you can breathe a little easier.
Caution About Debt Consolidation Loans
While debt consolidation strategies such as refinancing, home equity loans and second mortgages can provide a quick solution for those struggling with debt, they are not for everyone. If you are going to take this route, you need to make a commitment to getting and staying out of debt.
Remember, you only have so much equity in your home that you can use for this purpose. If you free up room on your credit cards only to run them up again, what will you do? Refinance again? Without a commitment to staying out of debt, you could end up in a worse situation than you were in before.
Debt Consolidation Loan Options
As stated earlier, there are many mortgage options for debt consolidation including refinancing, second mortgages, home equity loans etc. The option that is right for you will depend on a number of factors including current interest rates and your mortgage renewal date.
To determine which option is best for you, you should speak with a mortgage professional.
In conclusion, if you are ready to get out and stay out of debt, then a debt consolidation loan can be an excellent tool to help you do that. If you would like to learn more about your options and receive advice on how these strategies can work for you, then contact the team at Akal Mortgages today at (416) 621-1300.
When we say YES! We stand behind our promise.®™