High interest rate credit cards, auto loans and lines of credit can be difficult to pay off. Luckily, homeowners have helpful options that can help them manage their debt before it gets out of control.

With interest rates on the rise, more Canadians are beginning to feel the pinch of higher borrowing costs. High interest rates on credit cards, auto loans and lines of credit can make it harder to pay off your Debt, leading you further astray from your financial goals.

When it comes to managing debt, homeowners have a decided advantage. Whether through a home equity line of credit or Debt Consolidation mortgage, homeowners can put their equity to work for them. Below are four important considerations every homeowner should factor before choosing a debt consolidation program.

1. Debt consolidation vs. HELOC

For homeowners, debt consolidation generally boils down to either a mortgage refinance loan or a home equity line of credit (HELOC). As the name implies, a mortgage refinance loan is obtained by refinancing your existing mortgage, which allows you to obtain additional funds to pay off outstanding debts. This allows you to consolidate all your debts into one simple payment.

A HELOC allows you obtain a lower interest rate and higher credit using home equity as collateral. Under this arrangement, the interest rate only applies to the funds you actually use. Like debt consolidation loans, you enjoy one, simple monthly payment.

A third option that homeowners may consider is the second mortgage. This method allows you to access funds to pay off debt by using the equity of your property.

2. A mortgage broker can help

Mortgage brokers can not only help you finance a home purchase, but also guide you through the debt consolidation process. They will go to market with your specific needs in mind and help you obtain the best consolidation loan based on your situation. That’s because brokers have access to lenders from across the country, so they can find the terms that best meet your needs.

More and more Canadians prefer to visit a broker before going directly to their bank. This trend has been well observed over the past decade. Homeowners facing financial hardship but have good equity and those simply looking to improve monthly cashflow should see a mortgage broker for more information.

3. Develop a monthly budget

While debt consolidation is here to help, it should only be viewed as a stop-gap measure on your road to financial health. This means developing proper money skills and keeping credit card debt under control. After all, obtaining a debt consolidation loan and then maxing out your credit cards repeatedly does very little to improve your financial health.

One of the most effective ways to keep track of income and outlays is to develop and refine a monthly budget. This can help you stave off going into debt over last-second bill payments.

4. Determine how long it will take to pay off your debt

In addition to your monthly budget, you should also have an end goal in mind as to when you expect to pay off your revolving credit, installment loans and car payments. Your monthly payments should therefore factor how much you can afford to pay as well as the maximum amount you can contribute. The sooner you pay off your debt, the better. That’s why it’s important to calculate the lifecycle of your debt and look to shorten the overall repayment of it as quickly as possible.

Managing debt isn’t always easy, but when done correctly, can take a huge burden off your shoulders. All debt consolidation should be approached with the intent of getting back on the road to financial health. As a homeowner, you have more options at your disposal for making this happen.

The post Homeowner Debt Consolidation: 4 Things You Need to Know appeared first on Canadian Mortgages Inc..