Debt consolidation mortgage programs can work, but you need to be aware of all the details. Mortgage brokers may help shop around for the best mortgage rate and terms.
Complete the lender’s loan application, keeping in mind that multiple credit inquiries may reduce your credit score. Therefore, you will want to be selective when making formal applications. There are many different unsecured debt consolidation loans in Canada, but too many credit inquiries can hurt your credit rating, so only make formal inquiries with lenders that you are serious about.
If you qualify for the desired mortgage consolidation loan, use the loan proceeds to pay off your existing debts in full. The bank may pay your debts off directly, or you may be required to do this yourself. Also, consider closing the old accounts to prevent yourself from running the balances back up again. If you do not qualify for a mortgage consolidation loan, then consult with a Licensed Insolvency Trustee.
Make the loan payments as required, and pay off the consolidation loan as soon as possible. If you’re wondering how debt consolidation works in Canada, it works best if you make all of your payments on time so that you can pay off your debt off as quickly as you can. The goal of a debt consolidation loan is to reduce the amount of money you’re spending on interest charges and you can help yourself by paying off your loan quickly.
Consider setting up pre-authorized payments directly from your bank account, as making timely payments on the loan may improve your credit score. Keep in mind that paying the loan off early may save on interest charges, however, may also result in pre-payment penalties, depending on the terms of your loan agreement.
Check all Debt Consolidation Providers first!
This is why it’s important to look at the terms of the different Debt Consolidation Canada providers and your specific loan. Rather than just knowing how to consolidate your debt, you’ll also need to know how to consolidate it effectively and this means getting the right loan for your situation. This is most often the loan that charges the lowest interest and the fewest penalties and fees.
Once the consolidation loan is paid off, ask the lender for written confirmation to keep in you records, and also check your Equifax and TransUnion credit reports to ensure that they correctly reflect the status of the loan. Also consider closing the account or take other action to prevent credit fraud.