Are Homeowner Debt Consolidation Loans Bad for Your Credit? The average Canadian struggles with balancing their life and family with their financial debt. This unprecedented debt comes from unexpected medical bills, car problems, and home repairs. Even those who have a sizeable savings account may face these difficult financial times.
Having multiple creditors that you are making payments to can make you feel stuck in a never ending cycle of debt. You probably have several different monthly payments with different interest fees, so it may feel like you aren’t even making a dent in your debt when you are paying every payment on time.
Consolidating your debts into a personal loan can be a huge stressor off of your shoulders. Continue reading to learn about homeowner debt consolidation loans and the impact it has on your credit score.
What Are Homeowner Debt Consolidation Loans?
A homeowner debt consolidation loan is a type of immediate financial relief for those struggling with high-interest debt repayment. Debt consolidation helps you pay off your outstanding debt with better parameters.
Homeowner Debt Consolidation Loan Options
The mortgage brokers at MortgageBrokersNetwork.ca will be able to make sure that you are getting the best possible consolidation loan for your specific situation. There are three options available when it comes to refinancing loans and debts to get back on track.
You may face the decision of:
- Refinance your mortgage
- Take out a home equity line of credit (HELOC)
- Take out a home equity loan
With your home as collateral, you will probably be more motivated to make your payments on time each month. However, most Canadians are going to take out a home equity loan. With the low interest rates, you will be able to make a difference in how much debt you have with each payment.
A mortgage broker who specializes in homeowner consolidation loans is going to want to do whatever they can to make the entire process easier for you. At MortgageBrokersNetwork.ca, we are always looking for ways to help our clients find their financial freedom.
Are These Loans Bad for Your Credit?
In the short term, yes. A homeowner debt consolidation loan is considered a hard inquiry on your credit score, so it may cause your credit score to fall.
A lower credit score tells banks and credit card companies that it may be risky for them to lend you money. This is where these borrowers are either denied the loan or hit with incredibly high interest rates. Though this protects the lender, it leaves you with debt that you just can’t get out from under.
Fortunately, this dip in your credit is only temporary. When you start making regular payments on the loan, it will go back up. As long as you continue to pay on time and avoid any additional debt, it will continue to improve over the life of the loan. You will find that without the added interest, you were able to increase your overall credit score and replenish your savings while staying out of debt.
Improving Credit Scores
If you’ve fallen behind on your debt repayment, whether that is credit card debt or student loans, your credit score may be suffering. A homeowner debt consolidation loan can help you to boost your credit score because you’ll be able to:
- Pay off high-interest loans in a lump sum
- Use less of your overall credit with lower interest rates
- Have just one repayment to worry about each month
When you max out your credit cards, you are using the entire credit amount. This can negatively impact your credit score. After consolidating your debt, you will be using less of your credit limit. Because of this, your credit score will continue to improve.
Achieving a Healthier Financial Future
Having a lower credit utilization, thanks to only having one big loan payment, can help to increase your credit score. A homeowner debt consolidation loan can help you to get back on track and replenish your savings.
Banks aren’t likely to take the risk that you might default on your payment. Because of this, they aren’t only looking into your ability to pay back the loan. They are also looking at your credit history, employment history, and even the amount of equity your home is worth. If your information doesn’t look ideal, they won’t consolidate your debt.
Even if you have been turned away by big banks and mortgage brokers, you aren’t out of options. MortgageBrokersNetwork.ca can help those facing issues involving:
- Bad credit
- Owed revenue in Canada
- Foreclosure
- Excess debt
- Bankruptcy
- Property taxes
In fact, we thrive on our ability to help those who’ve been rejected by major banks and other mortgage brokers. So, even if you are struggling with one or more of the aforementioned issues, we can help you to consolidate your debt and get you a new payment amount with lower interest rates.
Is Debt Consolidation Right for You?
If you think that taking out homeowner debt consolidation loans is the right option to help you get out of debt, speak with one of our mortgage brokers today. You will find that we use a common-sense approach to mortgage underwriting. We can help you get the numbers you are looking for without spending the rest of your life trying to climb out of debt.
Contact MortgageBrokersNetwork.ca today for more information. We want to see you achieve financial success! Once you consolidate your loans, you will be able to get to the point where debt is not the only thing on your mind.
