Residents of Kitchener can find themselves in debt for a variety of reasons. Sure, some of it has to do with unwise choices, but much of it also comes from life’s uncontrollable circumstances, such as an illness or an unexpected job loss. But whatever the reason you find yourself in debt, one of the best ways to get out of debt faster is through a debt consolidation loan.
What is a debt consolidation loan?
A debt consolidation loan is any loan that you take out for the purpose of paying off your other debts. Not only does this make it simpler for you to make your monthly payments (since there is only one bill to pay instead of several), but it also helps to lower the interest you are paying on your debts. That means that if you don’t change the amount you are paying down on your debts each month, you’ll be able to pay off your debt much faster.
Types of debt consolidation loans
There are two main types of debt consolidation loans – secured and unsecured. Secured debt consolidation loans are usually tied to the equity in your home and can take the form of a refinanced mortgage, a second mortgage, or a home equity line of credit.
An unsecured loan, is not tied to your home equity. In other words, you don’t necessarily have to be a home owner to get an unsecured loan. The drawback of course is that with an unsecured loan, you will be paying a higher interest rate than you would with a secured loan.
Which type of debt consolidation loan is best for me?
If you are a homeowner in Kitchener, then a secured loan is going to give you the best interest rates. Just keep in mind before applying for this type of loan that since you are using your home as collateral, you are at risk of losing your home if you become unable to make the payments.
The two most common types of secured debt consolidation loans are second mortgages and mortgage refinancing. Sitting down with a professional mortgage broker can help you determine which option is best for you, but generally speaking, refinancing is a better option if you are close to your renewal date and a second mortgage is the better option if your renewal date is still a long way off.
Contact Alternative Loan today!
If you need help getting out of debt, then a debt consolidation loan can be a great strategy. Contact us at our Kitchener office today to learn more.