Best Ways to Consolidate Debt: A Homeowners Guide to Financial Freedom
Between having to financially balance credit cards, mortgages, and loans, many homeowners often find themselves taking on too much debt. What might surprise you is that this is quite common and by no means a bad thing, especially when you have the option to consolidate your debt.
Debt consolidation is one of the best ways to alleviate your debt. However, the way you decide to go about consolidating your debt depends on the kind of debt you have and its balance.
For instance, credit card debt is one of the most typical stresses that Canadian homeowners deal with. In this case, the best way to consolidate debt would be to seek out a lower-interest option, which in turn could save you upwards of hundreds, and possibly even thousands, of dollars in the future.
While this almost sounds too good to be true, the reality is, with the right financial guidance, financial freedom truly is attainable. But before you set out to save thousands of dollars, let’s discuss some key details about debt consolidation.
What Exactly is Debt Consolidation?
Debt consolidation refers to taking out additional loans to help pay off (or “consolidate”) other debts you may have. Typically, homeowners turn to debt consolidation for their ability to combine multiple debts into a single, larger debt, such as a loan.
This combined loan will usually have favorable payment terms, including lower monthly payments, lower interest rates, or even both.
Why Consolidate Debt?
Instead of having to pay multiple payments at different interest rates, all on varying payment cycles, consolidating your debt allows you to make one simple monthly payment — typically at a lower interest rate!
Are you starting to see why so many homeowners choose to consolidate their debt?
Common debt consolidation options include paying off credit card balances, and even other outstanding mortgages you may have. When you consolidate your debt, you’re combining several payments into one low-interest monthly payment to save money.
Not only will you find it easier to stay on top of your payments (especially when you used to have to balance multiple payments), but you’ll also be working towards improving your credit score. With the right consolidation strategy, you’ll be able to avoid extra vendor fees and hard to detect term requirements that traditional lenders, such as the banks, often place on additional loans.
Consolidating Common Consumer Debts — Credit Card Debt, Student Loans, Mortgages and More.
While making minimum payments may suffice for now, as months — and often years — pass by, the ability to keep up with payments across multiple consumer debts can begin to grow challenging. Consolidating debt into one monthly payment works to prevent future financial payment complications.
First things first, whether it be student-loans, credit card debts, or more, the best action to take is to ensure your debt doesn’t grow too large. By simply staying on top of your monthly payments and never overspending what you can’t pay back, you’ll be able to avoid consolidating any kind of debt!
If it’s too late, however, one of the best ways to consolidate your debts to combine your balances through a low-interest second mortgage, such as a home equity loan.
Home Equity Loans to Consolidate Debt
A home equity loan is one of the best ways for homeowners to consolidate their debt, regardless of how much home there is.
Home equity loans allow you to take advantage of the value (the “home equity”) that your home and property have built up. The home equity loan allows you to borrow the money that you need by using that value as collateral. Apart from being one of the greatest ways to consolidate mortgage debt, home equity loans are also a great way to help finance other large expenses, home repairs, college loans, credit card debts, and more — the list really does go on and on!
Check out this article on other ways to take advantage of a home equity loan!
While the concept of consolidating debt may seem as simple as throwing all of your debt into a single loan to pay off, that isn’t exactly the case. It’s important to stay vigilant of the high-interest and unfavourable terms that traditional bank loans often require.
Specialized lenders, such as Leap Financial, leverage years of industry expertise to find you the best loans available, such as a home equity loan, so you can begin effectively consolidating your debts.
For more information on debt consolidation and financial planning advice, be sure to check out our other articles or get in touch with a Leap Financial specialist, today!