Debt Consolidation in Richmond Hill

A second mortgage is secured by your home which means you’re able to borrow a significant amount to offset multiple debts. You can borrow up to 80% of your home’s value and benefit from a low-interest rate compared to other types of debt. Since you’re securing the loan with your home as collateral, you reduce the risk for your lender which is what allows you to qualify for the low-interest rate. In fact, most banks offer second mortgages at single-digit interest rates. If you have credit card balances that attract huge interest fees, this could be an ideal option for you.

Drawbacks of second mortgages

By taking a second mortgage, you put your home on the line. Should anything happen and cause you to stop making payments, your home may be taken through foreclosure. Additionally, second mortgages can be very expensive because of all the closing costs involved. You’ll need to pay for things like credit checks and appraisals when the loan is processed. Keep in mind that the second mortgage interest rates are likely to be higher than your first loan’s rate. This is because the second lender is taking more risk than was the case during the initial transaction. This second lender may never get paid if you stop making payments until the first lender gets all their money back.

Have you ever considered taking an overdraft on your checking account? This form of financing is often given by banks to allow their customers to cater for emergency situations when their account runs out of cash. When you access a line of credit, expect to pay lower interest fees than what is charged on standard credit cards depending on your credit rating. You’ll be required to make minimum monthly payments to cater for the line of credit or overdraft.

If you get used to overdraft lines of credit, you may end up spending more paying it back than you should thus getting into further debt. Some banks will even deny you the access to overdrafts if they notice you borrow too much. Most banks don’t offer strict limits as to how often you can use the lines of credit. The limit given will depend on your credit rating and how much you qualify for. Before you choose to take this route as a debt consolidation method, consider setting up a transfer from your own savings account.

Do you often dread every time bills arrive at your home? Do you find yourself panicking when the phone rings with an unknown number? One tactic you can take advantage of to get out of debt faster is shifting your credit card debts into one card with a lower interest rate. If you owe lots of creditors small amounts, taking a loan to pay them off could be a viable option that makes your debt more manageable. Balance transfers are only ideal when you have credit card debt.

When you approach your bank or credit union, they can give you a balance transfer offer with low fees or even a 0% APR introductory rate. This means that initially when you take the loan, you will be required to pay little if any interest since there’s a grace period. As soon as the grace period ends, you’ll get back to paying the standard amount, which is usually much higher than the introductory rate. If you are considering this option, understand the terms and conditions of the balance transfer such as how much you will be expected to pay each month once the introductory period ends.

A debt management program also allows you to make a single payment every month which simplifies the process of tracking your debt. However, the payment is made to the credit counselling organization which will then forward it to the respective creditors. Not everyone qualifies for a debt management program because the creditors must agree to it before you move forward. Sometimes the creditors refuse to agree because it means that you will pay off the credit with low or no interest rate.

A debt management program can have a negative effect on your credit rating. It can be extremely difficult for you to qualify for any form of financing until two years after you finish the program. Your credit counsellor will begin the process by coming up with a proposal that shows your creditors why you are fit for the program. Any creditors who don’t agree will not be part of the program. We understand how overwhelming the process of consolidating debt can be. If you need help figuring out what’s right for you, speak to our expert today. We are happy to help you find out what options are available for your unique situation.