If you are one of many residents of Lethbridge struggling to stay afloat in a sea of bills and have been actively searching for a way to keep your head above water, you surely have run across debt consolidation. Search the Internet and you will find debt consolidation in Lethbridge as number two on most lists of preferred methods for dealing with debt.
If you are dealing with large amounts of unsecured debt, debt consolidation using the equity in your home as collateral is universally hailed as the only way to go. If you have good credit and a stable source of income, it very well might be.
While many Lethbridge residents think refinancing their existing mortgage is the only way to make use of the equity they have in their homes, there are actually two other options for debt consolidation in Lethbridge – second mortgages and home equity lines of credit (HELOC.)
Regardless of the debt consolidation approach you select, you should know about a huge disadvantage. Debt consolidation doesn’t reduce the total you owe by even one dime, and in many cases, it actually increases it.
When you consolidate your existing debts, all you are doing is moving your “eggs” from several baskets and placing them in a single basket – but you still have the same number of eggs.
If you have an existing mortgage of $90,000 and you owe your credit card issuers and a few other lenders a total of $15,000, your total debt is $105,000. If you refinance your mortgage to $105,000 and pay off the other debts, you still owe $105,000. But in actuality, you might owe more.
Refinancing your mortgage can come at a higher cost than you might think. If your existing mortgage has prepayment penalties, that amount and associated closing costs will be added to the total you owe. However, even though you may increase the total debt, you will almost certainly reduce your monthly payments, and that is a good thing, right?
It should be but we often see people in our offices for which it didn’t turn out that way. Once you pay off that $15,000, you now have $15,000 in available credit, begging to be used. If you got into financial trouble in the first place from living beyond your means, debt consolidation in Lethbridge does nothing to stop you from doing it again. Our advice is to get credit counseling to learn to manage credit and cut up most of your cards, leaving one or two for emergencies.
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