How Your Home Can Help You Consolidate Debt

Home loan

The past year has been difficult for Canadians. With unemployment rates during the first months of the coronavirus pandemic higher than at any point since the Great Depression, many have struggled simply to keep up with their mortgage payments and put food on the table.

While the end of the pandemic may now be in sight, the economic crisis it has caused may last significantly longer. So perhaps it is unsurprising that many families are looking for ways to consolidate their debt and secure lower monthly payments.

One of the best ways to do this is through a home equity loan, which allows you to borrow against the value of your home to manage your debt more effectively.

What is a Home Equity Loan?

A home equity loan is a financial tool that allows you to access cash based on the value of your home.

When you purchase a house, you start to slowly accumulate equity over time by paying down the principle on your mortgage or by the value of your property increasing. Long before you own your home outright, you will have generated a significant amount of equity through your monthly mortgage payments, and a home equity loan allows you to use this as collateral.  

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How Can a Home Equity Loan Be Used to Consolidate Debt?

The average American is carrying debt $38,000 of personal debt, excluding mortgages, and as much as 25% of this is high-interest credit card debt. When you’re juggling car payments, credit cards, student loans, and payday loans, it can be hard to stay on top of all of them — especially if you’re temporarily out of work or receiving welfare.

By replacing all these smaller monthly payments with a single payment streamlines the process, making it easier for you to meet your commitments and helping to ensure that your credit rating isn’t torpedoed by months of missed payments.   

A home equity loan gives you a chance to leverage the value of your house — in some cases, up to 80% of it — to free up the money you need to get the bill collectors off your back and pull out of the debt spiral.

Who Can Apply for a Home Equity Loan?

Home equity loans are available to any homeowner, but the particular type of home equity loan you will want to apply for depends on your particular financial circumstances.

If you’re struggling with high debt levels and have little to no regular income, a brokerage specializing in alternative residential mortgages like Burke Financial will be able to provide you with the greatest range of options.

When working with a brokerage, you can secure a home equity loan even if you’ve been rejected by the banks, have a credit score below 650, and don’t have a regular source of income. The approval process is streamlined, and you could receive the funds you need within a week of applying.

As the new year begins, millions of families are suffering through no fault of their own. With debt levels already at historic highs before the pandemic began, the economic crisis has left many in a spiral of debt it can seem possible to escape from.

The good news is that if you are looking for ways to get your debt in hand, an alternative sub-prime mortgage brokerage may be able to help you find a solution that can help you find debt relief today.  

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.