If you owe money and struggle to pay it off, you can use the value of your property to secure a loan for debt consolidation in Collingwood Ontario. Debt consolidation is a viable method many people use to eliminate their debt. For homeowners in Collingwood, they may have extra equity in their homes that they can use to tackle their financial problems.
According to Statistics Canada, Collingwood is the 24th fastest growing community in Canada. Over the years Collingwood has experienced an influx of families and entrepreneurs leaving big cities to enjoy the more relaxing and scenic community. This has led to an increase in home values, something that can provide extra financial leverage to Collingwood homeowners struggling to manage debt.
Need Help with Your Debt?
If you need help managing debt, you are not alone. Many people are struggling with debt throughout the pandemic and the upheaval it has created in the job market.
If you are worried about not being able to reduce your debt, there are options available to help you.
One of the most effective methods of debt repayment is a debt consolidation loan.
What is a Debt Consolidation Loan?
A debt consolidation loan is a loan that is used to repay all the money that the borrower owes to their creditors.
Paying off all outstanding debts (such as credit cards and overdue bills) with a debt consolidation loan can have significant benefits for the borrower.
What are the Benefits of Debt Consolidation?
Easier-to-Manage Payments
While your total debt remains the same, it is now owed to only one lender instead of many. This makes it easier to keep track of your payments, reducing your stress and increasing the likelihood that you will make every payment on time.
Reduced Monthly Payments
If you are managing credit card debt from multiple creditors, then a debt consolidation loan would help you save money by significantly reducing your monthly interest payments while you pay off the principal.
Credit card debt comes with high interest rates, often hovering between 19 and 29 per cent.
The interest rate for a debt consolidation loan is closer to 10 per cent or less.
You also might be able to further reduce your monthly payments by negotiating lower principal payments and by elongating your loan term. The ability to negotiate this option will vary depending on the lender and your current financial situation.
With reduced monthly payments you save more money which can be used to pay off your debt faster.
Debt Consolidation Improves Your Credit Score
When you consolidate debt, you pay off all your old creditors with the new loan. This action gets recorded in your credit history and shows that you can pay back lenders, even when using a debt consolidation loan.
Having a good credit score increases your eligibility for other kinds of loans and the improves your eligibility for lower interest rates and fees on future loans.
As long as you don’t miss payments or default on your debt consolidation loan, your credit score will improve.
What should I know about debt consolidation?
Debt consolidation loans are approved based on how much home equity you have in your home. Home equity is the value of your home that you have completely paid off.
If you have enough equity you can borrow $20,000 or more for debt consolidation.
There are 3 different types of debt consolidation loans:
1. First Mortgage
If you have fully paid off your home, you can get a debt consolidation loan that is treated as a first mortgage.
First mortgages have the lowest interest rates and fees in the lending industry.
2. Mortgage Refinancing
If you have a small portion of your first mortgage left to be paid, you can receive a debt consolidation loan in the form of mortgage refinancing.
When you get mortgage refinancing, you get a new mortgage with the current interest rate that is large enough to pay off your original mortgage and all your other outstanding debt. This can save you money when interest rates are lower than what you paid on your first mortgage.
3. Second Mortgage
If your home already has a first mortgage on it, a second mortgage can be approved for debt consolidation if you have enough equity in your home to get a loan big enough to cover your debts.
What Are the Risks of Getting a Debt Consolidation Loan?
Debt consolidation loans are secured by your home equity. If you miss a payment due date or fail to make your required payments, your lender can use power of sale or foreclosure on your home to get their money back.
Depending on your loan agreement and when your lender declares power of sale or foreclosure, you may be able to prevent the loss of your home if you act quickly.
Debt Consolidation Options in Collingwood, Ontario
Known for its proximity to popular destinations like Wasaga Beach, Blue Mountain, and an abundance of scenic tourist destinations, Collingwood has always attracted investors and homebuyers from all over Ontario.
Despite a drop in tourism, housing trends during COVID-19 clearly demonstrate that Collingwood’s unique location has only become more valuable over time.
The Southern Georgian Bay Association of Realtors reported that the total value of all properties sold this year is more than double since last year.
Home sales in June 2020 totalled $302 million, almost 75 per cent more than last year and home values in Collingwood are up by 35 per cent, compared to November 2019. This increase in home values could provide enough equity to help indebted homeowners secure a debt consolidation loan. If you are thinking about using your home equity to get a debt consolidation loan, or want to learn more about how it works, talk to a local broker and get quality advice for free with the Mortgage Broker Store.
The Mortgage Broker Store has a vast network of lenders who have helped borrowers get financial assistance for a myriad of purposes including debt consolidation in Collingwood and across Ontario. They can work with you to find effective solutions to eliminate your debt and foster financial stability.