Don Stoddart, AMP

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Debt Consolidation

Exploring Debt Consolidation

A Strategic Approach to Managing Your Mortgage

Debt consolidation is a strategy used to manage and reduce debt by combining multiple debts into one single, lower interest loan. This can help simplify debt repayment and potentially improving cash flow and in some cases interest rates.

In Canada, debt consolidation can be accomplished in a few ways:

Balance transfer credit card: This involves transferring multiple high-interest credit card balances to a single credit card with a lower interest rate. This may also help with your credit score.
Personal loan: This involves obtaining a loan from a financial institution to pay off multiple debts and then making one monthly payment to repay the loan.
Home equity loan: This involves using the equity in your home to obtain a mortgage to pay off multiple debts and then making one monthly payment to repay the loan.

It’s important to keep in mind that debt consolidation will only be effective if you also address the underlying reasons why you accumulated debt in the first place. Creating and sticking to a budget, reducing spending, and increasing income can all help you have debt relief and avoid future debt. I would recommend using Cash vs debt or credit card. This way you always see how much money you have to stay within you budget and make it to the end of the month.

Too much debt can cause stress on a relationship and/or effect your heath. So don’t keep brushing it aside it must be delt with.  Additionally, you may want to consider seeking the advice of a financial advisor or credit counselor to help you determine the best debt consolidation strategy for your specific financial situation.

Many Canadians are taking advantage of refinancing their home to access some of the equity, The new mortgage can be used to reduce their credit card debt. Why pay high interest rates on your bank’s credit card debt when you can add that debt to your mortgage and pay a much lower interest rate! One important part of a strategy is knowing “good debt” from “bad debt”. A well-planned mortgage can help you transform these bad debts into good ones and get them out the way. Good debt is used to purchase assets that increase in value over time, such as a home or investment property. Uncollectible claims or bad debts are used for things like vacations, cars, and boats. Bad debt is often used to purchase consumer goods that depreciate in value over time. If you can pay off your credit cards and pay down your mortgage, you’re well on your way.

It may surprise you just how long it can take to pay off a credit card with minimal payments a balance of 10,000 can take 30 years or longer you need to read the back of your statements. It will explain exactly how look it can take.

Credit card debt is considered “bad debt” because it has a high interest rate and can be very expensive to carry. The most effective way to pay off credit card debt is by paying more than the minimum balance due each month. If you are not able to do this, then you should consider consolidating your credit cards into a lower-rate loan like a mortgage or line of credit. If you’re paying off your debts, here are some tips to start with.

  1. Make a list of all your credit cards, loans, and other liabilities. This will help you determine how much money you owe and where it is going each month.
  2. Determine what your minimum monthly payment is on each debt and compare it to the amount you can afford to pay each month. If you can’t afford to pay more than the minimum payments, then consider consolidating all of your debts into one low-interest loan with a lower monthly payment.
  3. I always suggest looking at the interest rates and balances. Make minimum payments on the lower interest rate debt and take the extra money and put it towards the higher interest rate debt, the idea is to get it paid off faster. then you can use the extra funds to pay down the next highest interest rate debt.
  4. Make all of your minimum payments on time and pay off the loan as quickly as possible. If you choose to consolidate your debts, try to pay more than the minimum payment each month in order to reduce the amount of interest you are charged.
  5. Pay off your debts or consolidating, your debt can help you live the life you always imagined.
  6. Consolidate high interest rate credit cards to one lower rate.
  7. Save and boost your cashflow.
  8. Reduce stress knowing that your financial situation is now manageable.

In order to consolidate debt, you need to evaluate your debts and determine the best way to combine them. This could involve transferring multiple high-interest credit card balances to a single credit card with a lower interest rate, obtaining a personal loan, or using the equity in your home to obtain a loan.

Contact us, your local mortgage broker, to learn how to consolidate your debt!

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