The process of consolidating debt aims to help individuals to pay off their consumer debts by taking out a new loan. This combines multiple debts into a singular pool of debt, which typically offers better pay-off terms that an individual would receive with multiple debt accounts.

Why Consolidate Debt?

People choose to consolidate their debts for a number of reasons. Below are just a few advantages:

    • Finances are simplified
    • You can save money
    • Monthly payments become more manageable
    • Debt can be paid off sooner

Why Some People Should Not Consolidate Debt

While debt consolidation seems like a no-brainer, there are a few things to be wary of. The downside to consolidation is that having extra money each month can become a trap for those who see the money as just that – extra funds to spend.

This becomes risky, as the money saved should ideally be going towards paying off your mortgage, or to necessities, not to vacations, expensive cars, and material goods. Extra breathing room in your bank account each month should not be an excuse to dig yourself into a financial hole. Spend and save smart.

How Do I Know If Debt Consolidation Is Right For Me?

Your eligibility for debt consolidation depends on:

  • Your credit score
  • Your finances/ budget
  • Your debt repayment goals

However, you should never look at debt consolidation as your way out of a financial crisis. You still need to work hard to build your credit and to maintain your monthly payments as scheduled. Create a logical and appropriate spending budget that does not surpass the income you’re bringing in.

The sooner you begin to save and spend strategically, the more stress-free and prepared for retirement you will be.

Your Debt Consolidating Options

The right mortgage solution can help you to pay off high-interest credit cards and improve your monthly cash flow. Debt consolidation solutions also let you pay off your mortgage faster, particularly if you choose to move an existing mortgage to a lower-cost lender.

You can consolidate debt through:

Line of Credit

For those with a line of credit, debt consolidation can take some pressure off by reducing your monthly repayments. However, paying the minimum will cause your payments to drag out over more years.

Second Mortgage

Often offering the lowest interest rates, taking out a second mortgage can be a strategic move for those who have a good amount of equity in their homes.

Credit Card Balance Transfers

Credit card companies will often offer low-interest rates that are attractive to consumers looking for ways to consolidate debt. However, transferring credit card debt can be risky as there are payment conditions that, if not met, can increase your rate and debt dramatically.

An Example:

Still not clear as to how debt consolidation can work for you? Below we examine an example of how to save money with debt consolidation:

 

YOU SAVE: $1,142/m

 

As you can see, when you consolidate your mortgage, car, credit card/line of credit, and your penalty to break mortgage, you can save big – a sum of $1,142 per month in this case.

This extra monthly cash flow can be used for immediate needs, or it can be re-applied to the mortgage as pre-payments – allowing you to be mortgage free sooner. The choice is up to you.

How The Mortgage Station Can Help

Credit cards and other sources of debt come with higher interest rates and the burden of managing multiple payments each month. Our team can create a plan that will help you to reduce your debt and put yourself in a better financial situation through consolidation.

Speak to an agent today! Call 1-877-512-0007