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Category: Debt Consolidation Loan

  • Protecting Your Home Through Financial Restructuring

    Having financial troubles can be stressful no matter where you are in life – but it’s doubly so if you own a house.

    There’s a common fear that financial restructuring will mean losing your home. Fortunately, there are ways to protect against this.

    The first thing to do is to make sure that you stay up-to-date with your mortgage payments. If you haven’t defaulted on your mortgage, your chances of keeping your home through a financial crisis increase greatly.

    Let’s look at some of the financial restructuring options you might have when you own your home…

    1. Debt Consolidation

    As long as your mortgage payments are up to date, a debt consolidation loan can be a good way to deal with outstanding unsecured debt.

    Unsecured debt might be credit card bills, lines of credit, your cell phone bill, etc. It is anything not tied to collateral – so your mortgage and car loan would not fall under this umbrella.

    Unsecured debt usually has a high interest rate, making your monthly payments even more expensive. This is where a consolidation loan can help. You can use the money to pay off your unsecured debts, and then pay back the consolidation loan at a fixed interest rate over a manageable schedule.

    You won’t be paying as much in interest, so you can use the extra money to keep your mortgage payments up to date.

    1. Home Equity

    Sometimes your home can actually be a source of income for financial restructuring. If you have equity available, you might be able to use it to pay off your outstanding debts – essentially, this is a form of a consolidation loan.

    Again, this is dependent on your mortgage payments being current and made on time every month.

    1. Filing for a Consumer Proposal

    If you don’t have enough equity available or aren’t eligible for a consolidation loan, filing for a consumer proposal is another option.

    Consumer proposals deal with unsecured debt up to $250,000 (excluding your mortgage). In a consumer proposal, you make an offer to your creditors to settle your debts for less than what you owe. This offer must be accepted by the majority of your creditors and you must be able to prove they’ll get more money than they otherwise would if you filed for bankruptcy.

    In most cases, you can keep your home when you file for a consumer proposal, as your assets remain untouched. Again, this depends on your mortgage payments being kept up to date and is based on you having enough income to continue paying your mortgage after the proposal.

    A good financial advisor will structure your consumer proposal based on equity.

    If you have more than $250,000 in unsecured debt, you might file for another kind of proposal or bankruptcy instead.

    1. Filing for Bankruptcy

    Filing for bankruptcy is where most people fear they will lose their home. This is because in a bankruptcy, assets are often sold to pay off debts – including in some cases your house.

    However, this doesn’t always happen – and you may able to keep your home depending on the amount of equity you have available.

    If:

    • You don’t have much equity (this varies depending on province), and
    • Your mortgage payments are up to date

    your ability to keep your home increases substantially.

    If you do have a lot of equity, you may still be able to keep your home by repaying your equity through borrowing money, or through a second mortgage.

    A good financial advisor, like those at DebtCare Canada, will also help you structure your bankruptcy based on equity.

    1. If You Can’t Afford Your Mortgage…

    As we’ve discussed, keeping your home through financial restructuring largely depends on being able to continue making your mortgage payments.

    If your mortgage is up-to-date, you’re less likely to lose your house. But what if even after consolidating debt and making a budget you don’t have enough income to make your mortgage payments?

    This can be a whole other issue – but it’s important to remember that you still have options. You might need to:

    • Make more income through asking for a raise or getting a second job.
    • Or sell your home and downsize to a smaller mortgage.

    While selling your home may not necessarily be the same thing as keeping it, it can be preferable to losing your home through having it seized. In this option, you would still retain the profits from the sale, and you could use the money to move into another, less expensive property.

    A good financial advisor, like the ones at DebtCare Canada, can help you sort through your financial restructuring options, so your home is protected.

    Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.

  • Second Mortgage Financing for Dummies

    debt1Home renovations, a child’s education, debt consolidations – these are all common reasons why Canadians are taking advantage of second mortgage financing. If you own your own home, have significant equity and good credit – obtaining that financing is probably far easier than you may think. This week we cover some of the basics to help you.

    Second mortgage financing is a great option for people who need to finance larger sums of money. For example, a second mortgage would be great to finally finish your basement, a task which you’ve estimated at $30,000, but not necessarily to finance that family vacation to Disney World which will run you $5,000.

    Second mortgage financing is also incredibly attractive right now because of record low interest rates. Other than 1st mortgage financing, it is one of the lowest rate credit products you will find. Just remember, even though those rates are currently at record lows – that isn’t going to last forever.

    When looking at second mortgage financing there are a few important points to keep in mind. Firstly, it should be noted that,a few years ago, CMHC mortgage rules changed so the most you will likely be able to borrow against your home is 85% loan to value if you are seeking bank financing.

    Secondly, the key to a realistic second mortgage is how you structure it – amortizing a second mortgage is very important because you don’t want to stretch the debt out over 20 or 25 years. For example, you would be wise to amortize a $20,000 second mortgage to consolidate debt over 5 years. At an 8% rate payments would be less than $400 per month.

    What if your credit is a little on the shaky side? That’s ok. Even with some credit problems you can still get a second mortgage but more equity will be required and you may pay a higher interest rate.

    What to watch out for: loan shark style private lenders. Sky high fees and aggressive default clauses are two red flags that should never be ignored. A good mortgage broker is the way to go because they will deal with all lenders to get you the best deal.

    DebtCare has the knowledge and resources to get you the second mortgage financing for those big projects – at a rate that won’t break the bank. Call us today at 1 (888) 890-0888.

     

  • Is a Debt Consolidation Loan the Answer to Holiday Debt?

    debt2You made it through the holidays and now the credit card bills are rolling in. You went a little over your original holiday budget (don’t we all?), and now the credit cards are maxed out with no real way to pay them off. Perhaps you’ll just make the minimum payments for a while, until you’re back on your feet and feeling more secure – but will that ever happen? Do most of us actually have that extra cash each month to cover those bills? Probably not, since we wouldn’t rely so heavily on credit cards for holiday purchases if we did.

    Ok, so what is the problem with just paying the minimum payment? At least the bill is being paid, right? Sure, you’re paying the bill, but those monthly payments are comprised mainly of interest, meaning your actual balances decrease by mere pennies – and don’t ever really go down.

    This seems pretty negative so far, we know, but it is about to get better. Instead of just paying the minimum payments and not getting anywhere, consider a debt consolidation – this is a great way to save interest and get rid of those balances.

    If you own your own home, you’ve got access to a consolidation product that can save you a lot of money and time. Using your home is one of the cheapest ways to consolidate debt – but a regular mortgage can mean long terms and higher interest. Instead, go for one that is handled more like a loan.

    For example, if $20,000 is required to pay off your debt, and you’re considering a normal second mortgage, your broker will amortize that debt into the first or second mortgage and stretch it over 25 years. That means that you are paying interest on $20,000 for 25 years – when that is largely unnecessary.

    Instead, when you work with a company that finds a mortgage product that works more like a loan, one that does not involve your first mortgage in the process, the issues with amortization and interest disappear. For example, a 5 year amortization and 5 year “open” term mean the debt is done in 5 years or less at your option, your first mortgage is not disrupted and you are not paying that interest for a long period of time – and that interest is lower than most other debt consolidations because it is a mortgage.

    If you want to start 2016 on the right track financially, a debt consolidation loan may just be the answer to dealing with those holiday bills – and a mortgage that is structured more like a loan is a great way to do it!

    For more about a mortgage-style debt consolidation loan please call DebtCare today at 1-888-890-0888.

     

  • Back to School Blues? Consolidate Credit Cards and Stop the Interest

    The back to school season, particularly for parents, is often a very hectic time of year, especially with regard to finances. The need/desire for new school clothes, shoes and supplies often leaves parents with racked up credit cards once all is said and done – or rather, purchased. And often accompanying these credit card bills is the challenge of finding money to pay them off.

    Check out this infographic from BMO to see just what these costs add up to:

    debt1

    So, what options are available? Consolidating credit cards is a great way to reduce your debt – and often makes sense – but the type of consolidation depends on your own personal circumstances. Here are a few options that may be available to help you deal with that back to school debt.

    1. Home equity loan. By using the equity in your home, you can consolidate credit cards, thereby reducing interest and consolidating the various bills into one monthly payment. Of course, this is only possible if you own a home and have sufficient equity for this purpose. If you rent, or are without equity, this is probably not going to be a viable option for you.
    2. Consumer proposal. This is another great option, especially if your credit isn’t great or if you don’t have the security or equity for a loan. A consumer proposal will have some impacts on your credit in the short term, but this is balanced out by the fact that interest stops accumulating, there is, like a loan, just a single monthly payment, and in many cases the overall debt owing is reduced.
    3. Line of credit or loan from a lender. This is another good option, and can achieve the same things as a home equity loan: lower interest and one monthly payment. You will need to have good credit or security for this option. At the same time, this is often the most expensive option of all because it will involve higher interest than a home equity loan or a consumer proposal.

    Kids are expensive, and when back to school season rolls around, they can become even more so. Once those bills start coming in, don’t stress. Call DebtCare Canada to find out about how to consolidate credit cards and get rid of debt: 1-888-890-0888.

     

  • The Last Loan

    the last loanWe wanted to write this blog because we often see patterns regarding triggers for serious financial problems and clear points in time where different choices could have changed the course of the problem. Sure, there are instances where a sudden occurrence, such as a job loss or divorce, can cause abrupt and unexpected financial turmoil, but more often than not people build their financial problem over time.

    This is evidenced by just about every news publication reporting that Canadians are carrying a dangerously high level of personal debt. Over time debt accumulates like a snowball.

    Example scenario:

    • It only takes using those credit cards too much one month to push you into a situation where you can’t pay in full and so you make a smaller payment.
    • Eventually you have a few cards with small balances so you decide to get a line of credit to consolidate them – only you keep using the cards once you’ve paid them off.
    • Finally you decide that enough is enough – you get a consolidation loan at the bank to pay the line of credit and the credit cards.
    • You go a couple of months without using the cards but then your transmission goes. You think, well, you will only use the card once, but this means the cycle starts again…
    • A year later, you have the consolidation loan and a balance on the line of credit and a couple of credit cards.
    • You have accumulated some equity in your property, so you decide to get a second mortgage to pay off all the debt one final time. You are successful in doing so.
    • However, in the end, just like with the last consolidation loan, a few months later you begin using your cards again and a year later you find yourself making a slew of minimum payments on your credit cards.

    Now you reach a pivotal point – another loan? We say no! Let your last loan be the last loan.

    Just as Einstein said, the definition of insanity is doing the same thing over and over again and expecting different results. If you continue to refinance and restructure your debt year over year, each year owing more, you will be caught in a cycle that is not going to break unless you win the lottery or get a major raise at work (and how likely is either one of these?).

    There comes a time when one must say “self, I need to get some professional help”. Just like you may go to a therapist for a personal problem or a lawyer for a legal problem, one who continues to struggle with accumulated debt also benefits from professional guidance.

    Stop the insanity! Maybe there is a quick fix and some help with budgeting is the answer, or perhaps you have really dug yourself into a hole and need some major intervention. Either way, you are going to need to do something very different to break the financial cycle you are in.

    If you would like to make your last loan your last loan and need financial guidance DebtCare Canada can help. Call us today 1-888-890-0888.

  • Is a Consumer Proposal a Debt Consolidation Loan?

    When looking for a solution to a financial problem or accumulated debt, you will find that there are many services available that offer different things. Banks and finance companies traditionally offer debt consolidation loans, while trustees in bankruptcy deal with debt through bankruptcies and consumer proposals.

    Debt consolidations involve consolidating debt into a single payment and debt consolidation loans have very similar characteristics to consumer proposals. A consumer proposal involves a proposal being made to your creditors wherein you agree to repay a portion or all of your debt through a single, fixed monthly payment.

    A consumer proposal is much like a debt consolidation loan because:

    • You begin owing a fixed sum of money.
    • You begin making a single monthly payment.
    • You can pay it off at any time.

    Some of the benefits that are offered through a consumer proposal that are not offered by debt consolidation loans are that in many cases a consumer proposal will reduce the overall debt owing, will stop collection action, will freeze the interest accruing on debts, and more.

    One of the drawbacks of filing a consumer proposal vs. taking out a consolidation loan is that it will impact your credit and your relationship with your creditors. Because creditors are not being paid according to the original terms of your agreements with them when accepting less than what they are owed and/or being repaid over a longer period of time, they will not likely do business with you in the future. In addition, the consumer proposal will be reported on your credit report for 3 years from the date it is paid in full.

    Now, one must weigh the impacts on credit against getting out of debt. If you owe so little debt that you could pay off all of your creditors in 3 to 4 years and have good enough credit to get a debt consolidation loan, then a debt consolidation loan may be the right answer. However, a consumer proposal may be the best answer if:

    • Your credit is already damaged to the point where you cannot get a debt consolidation loan, or;
    • You have so much debt that you cannot consolidate it all, or;
    • You have so much debt you just can’t see a way to pay it off in a reasonable amount of time.

    When it comes to making a choice with respect to how to deal with your debt it is important to recognize that each person’s financial situation is different. A debt consolidation loan or consumer proposal may not be the right answer for you at all. The best thing that you can do is consult a financial counsellor/consultant to perform an unbiased review of your finances, give you some practical advice, and provide the resources and representation to see your plan through.

    For more information about consumer proposals and debt consolidation loans or if you need a debt consolidation please contact DebtCare Canada at 416-907-2582 or visit www.debtcare.ca.