Do You Own A Home? How A Refinance For Debt Consolidation May Be The Fastest Path To Being Debt-Free
Canada may be the belle of the ball in the world economy, having survived the 2008 world financial crisis in a far better position than many Western nations did, but the financial news isn't all rosy at home. As of December 2012, the average Canadian consumer was indebted at never-before-seen levels, with the average household debt setting a new record of 164% of disposable income (that means $1.64 owed for each dollar earned).
If this sounds all too familiar to you, and you own a home, there may be a way for you to quickly and easily repay your debt and get rid of high interest rates.
With the low mortgage interest rates Canadians are currently enjoying, homeowners may qualify for what's called a "cash-out" refinancing of their mortgage: by borrowing at a lower rate than their current mortgage, it may be possible to borrow more money than you currently owe on your home, and the extra can be used to put yourself on a more manageable financial keel via a process called debt consolidation.
What Advantages Does A Debt Consolidation Refinance Offer?
It may be instructive at this point to first note what debt consolidation is not: namely, debt consolidation is not one of those questionable financial arrangements you've seen advertised on television that supposedly allows you to "settle your debt for pennies on the dollar" or something along those lines. Debt consolidation as a concept literally accomplishes what the term sounds like: it takes many separate debts and rolls them into one single chunk, so that you are responsible for paying only one monthly payment (in the case of a refinance for debt consolidation, this would be your mortgage payment) instead of, say, six separate credit card bills, though the total amount you owe remains the same. It's convenient, to be sure, but it would hardly be worth going through the rigmarole of refinancing your home simply to save the effort of writing an additional few cheques every month. No, the real advantage of a refinance for debt consolidation comes in the potential interest savings.
While mortgage rates in Canada's current low-interest environment can potentially come in at under 3% for many homeowners who choose to refinance now, the average Canadian credit card interest rate is between 14% and 15%! By taking a cash-out refinance for debt consolidation that pays off one's credit card bills and moves that debt over to a lower rate of interest, not only will the interest charges accumulate more slowly, consumers can potentially save a great deal of money in the long run because they will be able to put more money toward the principal, paying it down faster and thus the interest that is charged will be charged on an ever-smaller amount.
Bear in mind, though, that interest rates are not guaranteed to stay at their current, low levels for any length of time, so if you suspect refinancing for debt consolidation is a technique you could take advantage of, it's best to look into it as soon as possible.
If this sounds all too familiar to you, and you own a home, there may be a way for you to quickly and easily repay your debt and get rid of high interest rates.
With the low mortgage interest rates Canadians are currently enjoying, homeowners may qualify for what's called a "cash-out" refinancing of their mortgage: by borrowing at a lower rate than their current mortgage, it may be possible to borrow more money than you currently owe on your home, and the extra can be used to put yourself on a more manageable financial keel via a process called debt consolidation.
What Advantages Does A Debt Consolidation Refinance Offer?
It may be instructive at this point to first note what debt consolidation is not: namely, debt consolidation is not one of those questionable financial arrangements you've seen advertised on television that supposedly allows you to "settle your debt for pennies on the dollar" or something along those lines. Debt consolidation as a concept literally accomplishes what the term sounds like: it takes many separate debts and rolls them into one single chunk, so that you are responsible for paying only one monthly payment (in the case of a refinance for debt consolidation, this would be your mortgage payment) instead of, say, six separate credit card bills, though the total amount you owe remains the same. It's convenient, to be sure, but it would hardly be worth going through the rigmarole of refinancing your home simply to save the effort of writing an additional few cheques every month. No, the real advantage of a refinance for debt consolidation comes in the potential interest savings.
While mortgage rates in Canada's current low-interest environment can potentially come in at under 3% for many homeowners who choose to refinance now, the average Canadian credit card interest rate is between 14% and 15%! By taking a cash-out refinance for debt consolidation that pays off one's credit card bills and moves that debt over to a lower rate of interest, not only will the interest charges accumulate more slowly, consumers can potentially save a great deal of money in the long run because they will be able to put more money toward the principal, paying it down faster and thus the interest that is charged will be charged on an ever-smaller amount.
Bear in mind, though, that interest rates are not guaranteed to stay at their current, low levels for any length of time, so if you suspect refinancing for debt consolidation is a technique you could take advantage of, it's best to look into it as soon as possible.
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