Why Canadians choose Mortgage Broker Store’s Personal Loans
Debt is stressful. Having multiple forms of debt can be an exhausting financial situation to manage. According to the 2019 Canadian Financial Capability Survey, “8% of Canadians said they are falling behind on their bills and other financial commitments, up from 2% in 2014.”
Not everyone can manage this burden. That is why many people in Oshawa are now turning to the Mortgage Broker Store for their personal loans and advice on debt relief. With a vast network of lenders and financial experts in Oshawa, the Mortgage Broker Store can help you find the right lender for any loan you need, including loans to consolidate debt.
Consolidation Loans and Debt Relief
A debt consolidation loan is a form of debt refinancing that is based on securing one loan to consolidate credit. Consolidation loans combine the borrower’s existing debt into one loan. The debt is not eliminated, you still need to make monthly payments, but now only to one lender.
This method of debt relief allows the borrower to focus on servicing one debt instead of multiple at once, making managing payments significantly easier on the borrower and limiting the chances of missed or late payments. Depending on someone’s financial situation, consolidated credit from a debt consolidation loan an be a strategic method for debt relief.
Main Reasons to Consolidate Debt
- Lower Interest
Debt consolidation loans are often backed by home equity for reduced interest rates. Home equity as collateral is considered one of the least risky investments for lenders and thus has some of the lowest interest.
- Lower principal
The terms for debt consolidation loans can be elongated to lower monthly payments.
- Improved credit score
A debt consolidation loan increases your credit score by ‘paying’ your old debts. While you still have the same amount of debt, the reduction in the number of creditors you owe will improve your score. With fewer lenders to keep track of, preventing any missed, late or defaulted payments is much easier, which also improves your rating.
How do Debt Consolidation Loans Work?
Debt consolidation loans combine the existing debt of the borrower to reduce their financial commitments. With a debt consolidation loan, the borrower can focus on paying all their debts to one lender instead of multiple and often at lower interest.
Like any loan, you must apply to lenders for approval, the money you receive, and its interest depend on your financial situation and assets, including your credit score.
Typically banks and other financial institutions require a credit score of around 650 to approve loans, however for private lenders, credit score requirements vary drastically, and some don’t require it at all for loan approval.
After credit score is considered, most lenders need collateral to secure the debt consolidation loan. Most borrowers use their home equity as collateral.
For borrowers in Oshawa who don’t have home equity, leveraging property like a car can be the collateral needed for getting a debt consolidation loan depends on how much money you need. Some private lenders will approve of debt consolidation loans without collateral, but often at a very high interest rate.
Debt consolidation loans can be used for any form of debt including credit card bills, student fees, vehicle payments and home renovation loans.
The 3 Main Methods of Debt Consolidation at The Mortgage Broker Store in Oshawa
- Mortgage Refinancing
Negotiating a new rate and term with the lender. Optimal when interest rates are lower than when the mortgage was created, and the mortgage is at or near the end of its term.
- First Mortgage
Taking a loan out on a property with no existing debt. This poses little risk to lenders and thus comes with lower interest rates. Since there is no debt on the home, there is little risk for the lender, especially if the borrower has a good credit score.
- Second Mortgage
Homeowners can apply for a second mortgage if they have equity in their home. While interest is higher than a first mortgage, it’s still cheaper than other debt consolidation options like peer-to-peer loans and balance transfer credit cards.
With any loan there are risks. Most debt consolidation loans use the property as collateral. Failure to make the payments will force the lender to seize and sell your property through power of sale.
How to Get a Debt Consolidation Loan in Oshawa
Census data from the government of Canada found that over 40,000 Oshawa residents make $10,000 or less each year. When you have such low income, taking care of your debt can feel insurmountable, but you can still get help. There is a wide range of financial institutions in Oshawa that offer debt consolidation loans with varying interest rates and requirements.
At the Mortgage Broker Store, you can learn more about your debt consolidation options in Oshawa, including the best local lenders for debt consolidation loans.
Now offering free consultation and advice, find out if consolidation loans are what’s best for you and kickstart your debt relief.