How to get out of thousands of dollars of credit card debt
Nothing is more exciting than getting your first credit card. It’s a symbol of maturity and financial identity as you work to build your credit score to eventually buy a vehicle or a house. Starting early is always best but being responsible with the credit you are given is key no matter what age you are.
Credit scores are not built merely by spending, but also the consistency of your repayment behaviour. Falling out of the habit of doing so can lead to thousands of dollars’ worth of debt. Even if that ends up being the case, it’s possible for everyone to go back to being debt free. One of ways that people can achieve that is by consolidating debt with a home equity loan.
Tackle debt as soon as possible
Relying on loans to repay debt isn’t the most suitable mindset towards your finances, so paying your credit card back promptly after spending is a fundament al part of good financial habits. A common misconception is that leaving it unpaid won’t have any effect and that you can repay when you’re ready. However, the opposite is true and there are certain things that happen when debt is brushed aside for too long.
Unpaid balances collect interest
In Canada, every purchase will always have an interest-free grace period, which is usually three weeks after you receive your credit card statement for the new month. While you do have some time before the payment is due, paying off purchases is better done sooner than later. Credit cards have high, compounding interests attached to them, normally starting at 19.99%. The longer it is left unpaid, the more you will have to pay, which is why it is discouraged to spend beyond your means.
Credit card debt influences mortgage rates
Accumulating too much debt on your credit card and other debt sources can become a stumbling stone when you’re looking into buying a house. Some lenders and financial institutions use a person’s credit score and history to determine what the mortgage rate should be. Those who have less than ideal histories could potentially see higher mortgage interest rates.
The simple solution to avoid such a situation is by paying your credit card and other debt obligations regularly. If you happen to have a significant amount of debt, there are still solutions available to reduce your debt and get a more suitable rate.
DIY debt reduction solutions
The road to financial freedom looks different for every person. For some, they may need debt help from other parties, while others will be able to reduce it on their own. Regardless of the path you choose, there isn’t a wrong way to decrease your outstanding balances.
Renegotiate your interest
You will frequently hear that a good portion of debt comes from the interest, and that is true. If you have the opportunity to change your current interest, then it should certainly be taken. In some cases, you may have to negotiate a lower rate, but as long as you are in good credit standing, you have a good chance.
Debt consolidation
Financial institutions normally offer debt consolidation programs, in which they offer a lump sum to a borrower to allow them to repay their existing debts. The total sum that the banks might offer will depend on the borrower’s financial and credit history, so not all who are interested in debt consolidation will have access to the banks’ funds.
Home equity loans
Another type of debt consolidation loan is through a home equity loan. It’s similar in the way that you’d be receiving a predetermined amount of money to repay several debts, but instead of borrowing from a second party, you would be borrowing against your house’s value. As a result, you won’t have to worry about meeting the banks’ high requirements.
Other tips regarding debt Help and consolidation
Consider all types before choosing – each person has a specific financial situation; an unsecured loan will work for some while debt consolidation through home equity loans will be more beneficial for others.
- Set up an emergency fund – consolidating your balances gives you the opportunity to start saving up for hard days, such as job loss or medical emergencies. Getting ready for what could potentially happen in the future can keep you from going into further debt.
- Follow a payment plan that’s best for you – lenders will offer different payment plans but be sure to approach the plan objectively and stay within your means. Paying off as fast as possible is ideal but choosing stability over speed is more favourable.
- Stay consistent – the journey to financial security is not always short but it is worthwhile. Always remain disciplined because reaching your goals will feel triumphant.
Remember that while debt consolidation and home equity loans can raise your credit score and reduce your overall interest on any outstanding balances, adjusting your financial lifestyle is the most important aspect.
Because monthly payments often decrease when you consolidate your debt, you have the opportunity to change your financial habits and set up your savings. Having little to no debt isn’t just a onetime event; it’s a practice of budgeting and allocating specific amounts for your spending.
Home equity loans with Alpine Credits
As previously mentioned, one of the more beneficial types of debt consolidation is through a home equity loan. By accessing it, you automatically have more flexibility and lower loan interest rates compared to an unsecured loan or even to a major financial institution.
Contact us at Alpine Credits. Our team of financial solution specialists can work with you and can answer any of your questions regarding debt consolidation and home equity loans. We at Alpine Credits have been helping Canadians for decades, allowing them to access their home equity and reach their goals of financial freedom through debt consolidation.