Saving With a Debt Consolidation Loan
One of the main reasons why people opt for debt consolidation services or debt settlement Toronto is because they make repayment of amounts owed so much easier. Not only do you get to repay the money you owe as quickly as possible but also lower the interest rates on certain loans. At the same time, debt consolidation is one way to improve your credit score. It helps you to avoid carrying a balance on your credit cards and loans for a long time which could harm your rating.
If used properly, debt consolidation Toronto won’t just help you to speed up the repayment process, it can help you save as well. This happens because all the balances you are carrying on unsecured credits like credit cards and other loans, will be consolidated into a single amount helping you to get a lower interest rate. The payments you make every month will go towards clearing the principal of the loan and the little interest as well, which eventually saves you money. But there are certain ways to make debt consolidation work for you.
Take advantage of your home equity
If you own a home, you may be able to secure a consolidated loan with a very low interest rate based on your home equity. Of course, there is the huge risk of facing a foreclosure if you do not keep up with the payments. But if you are certain about using that equity responsibly, this can be the best way to save with a consolidated loan. Most lenders will look at the loan to value ratio in order to determine if you qualify for a consolidation loan with your home’s equity. This simply tells them how much the bank still owns if you took a mortgage to buy the home. With a loan to value ratio of less than 80%, you are likely to qualify for a consolidation loan.
Balance transfer credit cards
This is the other option that can help you save with debt consolidation and make repayments faster. If you have a lot of debt on credit cards, you can transfer their balances to a new card. The difference is that the credit cards you still owe have high interest rates and the new card will have a lower rate. Some cards even have an introductory fee of 0%. This simply means that for a stipulated time period, say 6 months, you will be allowed to make repayments interest free. But after that the interest rate can be significantly high so consider this option if you are certain that you will make the repayments early.
Also, you may not qualify for a card with low interest rate if you do not have a good credit score. There’s also the additional fees such as a transfer fee or annual fee that the bank will charge when you consider this option. Most introductory rates of 0% will only last up to 15 months so make sure you use this period wisely to make payments and get out of debt fast.