The Finance Blogger


Consolidate Debt

Consolidate DebtMany consumers are just not aware of how much money they can save when they consolidate a combination of personal loans, mortgages and credit card debt.  Consolidation of this debt can save hundreds of dollars in interest and reduce your monthly payments as well significantly. This step can make your financial life a lot easier and release money on your monthly budget for other things that you or your family may need.

What Kind of Debt can be Consolidated

Basically any kind of debt can be considered for consolidation. Sometimes the lenders will not even ask what the money will be used for since they are more concerned about your ability to repay the loan. Credit card debt carries a very high interest rate, varying from 18% to as high as 28% recently. If you are paying interest at these levels, it will cost a lot in interest and take you much longer to repay the debt.

Unsecured personal loans are next in line  in terms of interest rates and are much lower than credit cards. They are still high, due to the fact that they are unsecured and the monthly payments can be high as well due to the short terms associated with these kinds of loans compared to mortgages which have much longer terms.

Secured personal loans are secured by equity from a car or home and are the lowest interest rate loans you can obtain, next to mortgages which are always secured against your home. These loans also have a short payback time compared to mortgages. Typically they are five years in length, where as a mortgage can have a 25 year amortization. Secured loan monthly payments will be lower than unsecured loans, but still much higher than a mortgage payment for the same amount of money that you borrow.

Finally mortgages are secured by your home’s equity and as a result they have the best available interest rates in general. They also have the longest term with 25 years being the longest you can have in Canada. We have seen 30 and 35 year mortgages advertised in the US. The longer the amortization, the lower the monthly payment.

How Much Money can I save When I Consolidate Debt

The answer is that it really depends on the amount of debt you have, the current interest rates you are being charged and the amortization of the debt. It also depends on what kind of debt consolidation loan you can arrange or negotiate. If you have a lot of credit card debt which is consolidated with a mortgage, most people will see a significant drop in their monthly payments and the interest that is being paid.

Chat with your lender and ask them to calculate for you the amount of interest you will save if you consolidate all of your debt into one low interest rate loan or mortgage.

How Do I Obtain the Best Consolidation Loan or Mortgage

There are two ways to find the best consolidation loan or mortgage. One is to surf online and search for loans and mortgages that offer the lowest rates or to meet with various lenders at banks that you deal with. In both cases, this will take a bit of work and time for you to meet with these people or surf the net applying at several online lending companies and then waiting to see what is offered to you. If you have the time and knowledge, most people will find this very rewarding and helpful in terms of saving interest and reducing your monthly payments.

The other method is to hire a mortgage broker or a loan broker to find the best financial loan product for you. They will take all of your information and review with their lenders who can provide the best terms and rates. In most cases they will be able to find borrowers with good credit ratings, loans to consolidate their debt and save them a great deal of money. Many clients use this approach every day to save them money on their debts. Customers of lenders can also do a quick online check or check with their local bank to compare what is being offered and satisfy themselves that they are in fact getting the best deal.

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One Response to “Consolidate Debt”

  1. This is a really great post about debt consolidation and the money you can save, thanks

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