canadian-money-advisor.ca logo  
debt
What is DEBT CONSOLIDATION? Obtaining one loan to pay off many other loans is called as debt consolidation. Debt consolidation quite often involves a secured loan against a financial asset. Obtaining equity out of oneís home these days in Canada can save as much as 16% per month on interest charges. This equity can be used to consolidate credit lines, car loans, credit card debts etc.

Predominantly second mortgage used to be the only choice to consolidate any form of debt in Canada with second mortgage rates being as high as 19%.But now a top up on oneís existing mortgage is possible to remove the debt load thus ruling out the need of a second mortgage to consolidate your debt. Hereís an example to illustrate how much a customer would save by refinancing the existing mortgage instead of going in for a second mortgage.

Prior to debt consolidation for an asset value of $170,000 the mortgage balance would be $130,000 for a term of 5 years at an interest rate of 8.2%, inclusive of monthly payments of $250 per month for a credit card for a total of $8000 and a miscellaneous debt amounting to $3000 with a payment of $150 per.month.The total payment to be paid hence would stand at $1421.43 with a mortgage value of $1021.43.

Post debt consolidation for the same asset value of $170,000 by refinancing the mortgage instead of going in for a second mortgage, the mortgage balance would be $141,000 for a term of 5 years at an interest rate of 5.75%. Correspondingly the revised monthly payments for credit card and miscellaneous debt would stand at $0 since no second mortgage was taken. The mortgage payment for the above scheme would stand at $898.81 thus saving $522.52!

However one has to qualify for a debt consolidation loan by showing an acceptable credit rating and a steady income that would justify the consolidatorís ability to manage the loan. Broadly three things are to be considered before you enroll for a debt consolidation loan.

1. Is consolidation really needed?
2. Would it save your money and time while clearing off the debt?
3. Can you afford the reduced payments if not the full payments?

To make your debt consolidation problems simpler to be dealt with, Consolidated Credit Counselling Services of Canada, Inc. has come up with an interesting concept called the debt consolidation calculator that provides intelligent and appropriate results based on the customers unsecured debt amount. A much simpler way to determine whether Debt Consolidation is right suited for the current situation that you are in, would be to calculate your monthly debts in total by including mortgage, loans, credit cards and lines of credit. Divide the total amount by your gross monthly income. If the number is above .50, Debt Consolidation becomes an utmost necessity. If itís below .50 it may be favorable. Citizens in Canada can get in touch with debt consolidation experts to answer your queries or take into account your comments at . What is DEBT CONSOLIDATION?

Add Your Comments:
Fields with * are required
Your Comment Below:
 
Name*
 
Email*
 
Website
 
Code*
 
Enter Above Code
 
Note: Comments are moderated - Spam will be deleted
 

HOME | Contact | Disclaimer | About Us | Faqs | Discussion |