Blog Mortgage
  • 09 April 2020

Nearly half of Canadians have credit card debt; here is how you can get rid of credit card Debt

A Home Equity Loan is the best option for families that are looking to decrease their debt.

“BMO’s 2015 Credit Card Report also showed that one in three doesn’t pay off their credit card bill every month.

The report found over half (52 per cent) use their credit cards to make the majority of their purchases. And yet one third (32 per cent) don’t actually keep track of their credit card charges until they receive their bill at the end of the month”. http://globalnews.ca/news/1822207/nearly-half-of-canadians-have-credit-card-debt-report-shows-heres-how-to-get-rid-of-it/

Now, let’s go through some great reasons why you should use Home Equity…

Decreasing Interest Rates

Lower interest rates are, by far, the most compelling argument for transferring your debt to a home equity loan.

Interest rates on credit cards typically range between 19% and 29%.

Home Equity Loans offer significantly lower interest rates compared to credit cards.

Will the trade war eventually end? Maybe, hard to say when, however ending it is in the best interests of China and USA. If the USA and China come to a fair agreement the consensus is the world economy will take off in an upward trajectory and interest rates will follow.

For Example:

John has $50,000 in credit card debt. This debt is currently costing a minimum of $18,000/year if we consider industry standard 3 % of balances. John can get home equity loan and pay down the same amount of debt by paying out just $7,500 interest only – hence a client can save up to $10,000! That will increase cash flow and john can pay off debt easily by saving some money.

That’s only the worst case scenario chances are that if he have ok types credit and good income we might be able to get him home equity at much cheaper Rate.

Decrease Minimum Payments

John can save so much because here interest payments are lower and because home equity loans are typically interest only. In the example above, Jamie’s minimum payments are just $7,500, helps him to budget everything inside his spending reach.

Option for Flexible payment

As we mentioned previously, home equity loans are typically interest only. This means that you can decide to pay down more of your debt, reduce your monthly payments, or some combination of the two.

This keeps your payment options flexible and allows you more options to adjust your payments in the future, should the need arise.

Principal can be paid at rapid pace

As you have now more cash flow as your payments will decrease after getting home equity loan that means you can pay off your principal faster.

If you were to keep the same monthly payments with your new home equity loan, you would reduce your debt by 60% in five years. This compares to just 20% if you are making minimum credit card payments.

Easier handling of all bills

Consolidating your all debt into a one payment makes paying your bills much easier to handle. This saves you time, stress and, more importantly, makes you less likely to miss a payment.

Increase in Credit Score

Transferring your debt to a home equity loan helps to improve your credit score in a few ways:

Lower interest rates let you pay down your debt more quickly. Hence balances on your cards will decrease so raises your credit score. Note, however, that you might want to keep your credit cards, even after you have transferred your debt. Unused credit counts positively towards your credit score as it impacts credit by 35% that is if you have used only less than 50% of credit limit.

One payment makes you less likely to miss a payment. Payment history accounts for around 35% of credit score. Missed payments count against your credit rating and a consistent run of payments made will improve your credit

Better Interest Rate

You will get much better interest rate as compared to credit cards that is unsecured debt. They are also much more flexible in terms of your income and credit rating.

Better Option vs Transferring to other credit card

It’s better than Transferring to Another Credit Card as other credit card will have again higher rate. You will only reduce your interest rate by a couple of percentage points. It’s nice, but it’s not going to make a large difference in the end

How we can help

It’s a Number Game and we understand that you want to know exactly how it will work for you so let’s sit together and draft a success plan to gather. Call Us Today at Centum Gold Mortgages Inc. You can get information on how we can help you

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