July 1, 2019

How To Rebuild Credit By Consolidating Your Debt

If you’ve run into financial difficulty, it’s important to know your options. If you have equity in your home, we may have options for you.

 

What is debt consolidation?

Debt consolidation is a form of debt refinancing that involves taking out one loan to pay off many existing loans. Consolidating your debt effectively brings all debts together (by transferring them) into one combined loan with one monthly payment.

How does it work?

In reality, it’s impossible to combine individual loans because each has its own interest rate and repayment terms. With a consolidation loan, you’ll receive a new, larger loan and then use the funds to pay off all of the smaller loans you want to consolidate.

In many cases, consolidating debt can result in a lower monthly payment. This happens because different debts often involve different interest rates. By transferring balances from your highinterest rate debt into a consolidation loan at a lower interest rate, you can give yourself a bit of breathing room.

How is a consolidation loan used?

Common uses for consolidation loans are: paying off multiple credit card balances, auto loans, overdue bills, student loans, overdraft balances and in some cases payday loans.

How are consolidation loans issued?

They can be paid in two ways. The lender will either deposit the funds directly into your bank account, and then it will be your responsibility to pay out the debts or bills you want to consolidate. Or, the lender will pay off the debts you jointly agreed to on your behalf.

Why do people consolidate their debt?

• It can simplify finances – rather than having multiple debt payments to manage at various times each month, consolidating your debt means you’ll only have one to worry about moving forward
• To give themselves some “breathing room” by reducing their interest rate – this is because high interest debt is often replaced with a lower rate through the consolidation loan  
• The possibility of paying off debt faster (assuming your consolidation loan interest rate is lower than the rates you were paying on your individual loans)

How can we help?

• We’ve been able to help clients struggling to make their minimum payments through debt consolidation mortgages
• If you want to talk about your options, we’re happy to help

You Dream It. We Finance It.