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4 Common behaviors that lead to uncontrollable debt

Statistics shows that almost 2/3 of all Canadians are in debt. In simple terms, debt is part of life for a good number of Canadians. Unfortunately, the types of debts we are talking about here are not the beneficial ones, such as car payments and mortgages. We are talking about credit card debts, payday loans, and other avoidable loans that pose greater risks for Canadians.

The first mistake that most people do is thinking they have a handle on their finance, but the truth is that it is extremely easy to make a poor financial decision that can create a way for an ever-growing debt. It is only by identifying the traits that cause debt that we can all heal our financial situations.

Below is a compilation of some of the most common behaviors that lead to debt:

1. Going for the minimum payment trend

Almost every Canadian adult has a credit card or two. Unfortunately, most of us choose to pay only the minimum payment allowed at the end of every month. Consequently, our debts pile as a result of the high-interest rates that come with such options. The only way to beat this behavior is to forget this common trend of paying only the minimum payment is opting to pay everything in full.

2. Living beyond your means

This is one of the most common financial mistakes many Canadians make, especially because credit cards tend to encourage us to spend more that we have. To beat this behavior, create a monthly budget and stick to it by all means. Alternatively, you can get rid of your credit cards altogether.

3. Ignoring the total buying prices

Many Canadians today rarely look at the final buying price when purchasing things, such as cars, is the total buying costs. We tend to look at the monthly payments, and if they are manageable, we go for it. Looking at the final buying price is a wise idea as it will help determine if you can afford whatever you are looking to buy based on you current financial standing.

4. Ignoring the importance of saving

Emergencies happen all the times, and when you don’t have any money to take care of them, it is easy to turn to credit, and this can quickly set you up for a dangerous debt cycle. On the other hand, when you have savings to fall on during such times, borrowing becomes unnecessary

All in all, if after reading this you find that you are a victim of any or all of the above common behaviors that lead to debt, no need to panic, there’s how at the end of the tunnel. If you already own a home with established equity, contact us today, and we’ll all come together to see how you can obtain the finances you need to control your debts.

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Should You Use Your House Equity To Consolidate Your Debts

Given high credit card interest rates and associated fees, debts can build quickly. Given the overwhelming pressure and stress that these financial problems can create, many people are looking for a fast and effective way out. If this sounds familiar, you may be wondering should you use your house equity to consolidate your debts. This will give you the opportunity to turn all of your monthly payments into one easy manageable payment. It can also significantly reduce the amount of money that you are paying in interest. There are, however, a number of factors that you should consider before making this major decision.

Before making any decisions of your options in debt relief, you have to make an in-depth assessment of your current financial circumstances in order to determine whether or not outside assistance is really necessary. You may have the ability to pay down your debt within a fairly short period of time by simply reducing your spending a building a tighter budget.

There are, however, some signs that indicate a dire need for help. For instance, if credit cards have become essential rather than a mere luxury, you probably need assistance. You also have to account for regular borrowing with a regular inability to repay and the ability to only make the minimum payments on your past due accounts. If your wages are being garnished or if creditors have begun to stalk you, taking fast action is likely essential.

Debt consolidation is a loan that will allow you to consolidate or group a number of accounts into a single, monthly payment. If you own money to three credit card companies, you would be able to pay each of these cards off. The only obligation that you would have would be to pay down the loan that you used to consolidate these accounts. You would be paying the same amount of money, but it would be paid in a single payment rather than three.

These loans are tied directly to the home mortgage of borrowers. These loans can be obtained by taking out a second mortgage or refinancing. The funding you receive will be backed by your home equity and it will probably have a much lower interest rate.

Lower interest rates are the result of the debt being secured by collateral. This is different from unsecured debt which is not tied to any collateral and therefore comes with significantly higher interest. Unsecured accounts invariably entail higher risk and thus, lenders charge more for them. Although having a lower interest rate can be beneficial, there is also the risk of losing any collateral that you’ve used to secure your loan. This is why it is important to consider all factors before applying for this funding.