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Consolidate Your Debt

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Consolidate Your Debt

 The key to getting rid of debt is to commit to fixed, not declining, monthly payments. With your 19.75% credit card, if you were to pay off a debt of $30,000.00 at a fixed payment of $600 per month, you would pay the debt off in just under 9 years, and pay approximately $30, 000.00 in interest.
 
Suppose you take out a home equity loan at 4% interest. If you pay it off at $600 per month, you will retire the debt in just under 4.5 years – 4.5 years sooner than with the credit card. But best of all, your interest cost will be reduced from $30,000.00 to $3,000.00. That's approximately $27,000.00 in your pocket with exactly the same monthly payments!
 
In the real world, of course, your debt may not reside on one, but multiple credit cards. The practice of transferring all of your debt to a single loan is called debt consolidation.

 Here's how it works:
1. Add up all your credit card debt.
2. Take out a single loan, such as a home equity loan, for the total amount.
3. Use the proceeds of the loan to pay off all your credit cards in full.
4. Pay off the loan in single monthly payments. If you use a home equity loan, the interest rate will be half of what you paid on the credit card, or even less.

The most important thing to remember when looking to use the equity in your home to consolidate debt is that the government has restricted refinances to a maximum of 80% of the value of your home in Canada. So basically you would need at least 20% equity in your home.

For more information on this or for any mortgage related questions at all, please feel free to contact me today.

http://www.christinebuemann.com
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Location: 1596 3rd Avenue, Prince George, BC V2L 3G4, Canada

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