What You Really Need to Know about Debt Consolidation Loans
Debt comes in a wide variety of forms and it can be easy to fall into having several sources of debt with high interest and large payment amounts. One of the most common solutions to people's debt problems in Edmonton are debt consolidation loans. While it sounds great, there are some things you really need to know about debt consolidation loans before making the big decision to get yourself into one.
Debt Consolidation Loans Aren't Just for Homeowners
While debt consolidation loans are fairly common for people who have mortgages, not everyone who has a considerable amount of debt also has a home loan, so financial institutions may offer a consolidation loan for people with decent credit. There is method to their madness however, while the interest rates are lower than many high-finance products, generally speaking, debt consolidation loan interest rates are considerably higher than mortgage rates. They also rely on the fact that once you have lowered your monthly payment and have disposable income again, you will rack up more debt and perpetuate the cycle.
Sticking to a Budget Makes a Big Difference
There are three main reasons debt consolidation loans in Edmonton are chosen by a large amount of people:
- To reduce how many payments they make monthly
- Reduction in the amount of interest paid
- Improve cash flow with a payment that is lower than before consolidation
While all of these are excellent reasons to consider debt consolidation, you will open yourself up to further troubles if you don't budget and stick to living within your means. When you consider that most debt carries interest rates that are upwards of 25%, by taking out a consolidation loan you can save yourself a fair bit of money over time. With a lower monthly payment, you will have more cash on hand, which increases the effect of savings.
Don't Forget to Save
If you save all or at least a portion of the money you save by consolidating your debt, you can take a step towards improving your financial future. You can put that money towards your loan so you can become debt-free sooner. You can make additional payments on your mortgage so can live mortgage-free earlier or you could save for a down payment so you can become a homeowner in fewer years sooner than you thought was possible.
Want to work towards a brighter financial future? At BMC Mortgage & Investments, we want to help you on your journey to living a more financially stable and debt-free life. With more than 40 years serving clients in Edmonton and excellent investors, we can find the debt consolidation loan that works best for you. Contact us today and take the first step towards being in better financial shape.