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Debt Consolidation Loans

Debt Consolidation Mortgages

Debt will get the best of us. It starts with a credit card followed by a student loan and a car and before we know it, we’re drowning in debt. Debt consolidation is the life preserver we can hold onto as we get pulled back to shore.

What is debt consolidation?

Debt consolidation occurs when you take out one big loan to pay off many small loans. Due to their high level of interest, small loans generally take longer to pay off. Debt consolidation loans are used to pay off multiple debts in one single monthly payment. Instead of making several monthly payments to high interest debts like credit cards, car loans, and student loans, you pay for everything at once.

Do I Qualify For Debt Consolidation?

In order to qualify for debt consolidation you must:

  • Have a perfect (or almost perfect) credit rating – if your credit score has been tarnished, you will have to rebuild it before you apply for debt consolidation
  • Have regular income that does not vary to show lenders that you can make your payment
  • Have a sensible amount of monthly expenses –if you own many luxury vehicles and other exorbitant overheads you will not qualify

Does Debt Consolidation Offer Many Benefits?

Debt consolidation has countless benefits. You will get out of debt faster because you are taking care of all your payments at once and are privy to a lower interest rate. Moreover, with one monthly payment, it’s easier to plan ahead and stick to a budget, and you have fewer bills to keep track of. Finally, you end up saving money in the long term because you’re out of debt faster. An added bonus of debt consolidation is that you don’t hurt your credit rating if you make your monthly payment on time and in full.

Can I Use My Home As Collateral?

Yes. Your home is your biggest asset and it can be used as collateral when applying for debt consolidation. When it comes to debt consolidation, it is not unlike a second mortgage in the sense that you are leveraging your prevailing assets (in this case, your home which has existing equity) to give lenders a piece of mind. You’re basically telling them that if you default, they can have your home. When you use your home as collateral, lenders see you as a less risky investment and are more inclined to offer you an even lower interest rate.

You should meet with a broker before you visit your bank to apply for debt consolidation. Brokers have access to a variety of lenders and are more adept at getting you the consolidation package you need with the lowest possible interest rate.


Canada’s mortgage website

Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).

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