Home Equity Loan (HELOC) – Your Debt Consolidation Options 

Posted on 22 February 2019

Do you own a home? You may be considering debt consolidation via a home equity loan, so here’s what you should know before you make your decision. 

Home equity can be the bargaining chip you need to get out of debt. In some cases, it’s possible to borrow enough to pay off all high interest debt for a much better rate. The amount of equity in your home will be a big factor in determining if a home equity loan (HELOC) is right for you, after that, how much debt you owe. If your primary concern is to avoid bankruptcy, leveraging home equity may not be the only option to consider.

Do you have home equity?

First things first, it’s important to know if you have home equity or not. You will need an accurate valuation of your home. In addition to this, you’ll also want to get your most current mortgage balance. Don’t forget about the balance on any other loans secured to your property.

Subtract any debt…

Subtract any debt from the estimated value of your home. The difference is your home equity – how does it measure up to the debt you need to consolidate? Naturally, if you owe more than your equity, another loan against your property may not be your best debt solution.

How does a home equity line of credit work?

A HELOC is advanced as a pre-determined “credit limit” amount. You can access the approved funds as you need to. You can also use them for whatever purpose you choose. The loan operates similar to a credit card account. Similarly, you make payments based on your balance at the time payment is due. Once you’ve paid down the credit line, you can always use it again if you need to. To qualify for a home equity line of credit, you’ll likely need income and a fair/good credit history. Of course, you’ll also need home equity. Your home will be used as collateral just like a mortgage.

The Consumer Proposal alternative

An alternative solution to paying interest would be a consumer proposal. A consumer proposal is a debt solution that will allow you to avoid bankruptcy without adding more debt against your home. Your HELOC will include interest if you borrow against it, but a consumer proposal fixes your debt in time and stops interest. We will base your offer on how much equity you have today.

Debt-Free in 5 Years or less

If you have more equity than debt, you will repay your creditors in full with your offer over a maximum of 5 years. But, if you have less equity than debt, you may be eligible for a reduction in your total debt addition to stopping interest.

An interest-free option

A consumer proposal is an open-ended debt solution. As a result you can pay it off as soon as you like, or take the full term. One of the benefits to this option is when your mortgage comes up for renewal. During the proposal, you can try to refinance and borrow enough to pay it off. Essentially paying off the remaining balance to become debt free and improve your credit score much faster. 

Home equity loan or consumer proposal

A consumer proposal is only annulled/cancelled if you fall three payments behind. As a result, it carries a minimal risk. Because even when a proposal is annulled it can be corrected. As a result, you won’t lose your home if you fall behind. A secured loan is always going to carry the risk of a forced property sale if you can’t pay. But if you keep up with your payments a home equity loan can be a good debt consolidation solution.

Speak with a Licensed Insolvency Trustee

So before you decide which course of action to take, speak with a Spergel Licensed Insolvency Trustee and let us do the math. We’ll provide you with an in-depth analysis of the options that will clear up your debt, while protecting your home.  

You owe it to yourself to call us and discuss your options 1-877-501-4321. Too busy to call right now? No problem, we offer online booking for your convenience.

Helpful starting information:

What to Bring to an Appointment

To get the debt help that you need, please bring a list of who you owe and how much to each, a list of everything you own and your monthly household budget. Don’t have everything right away? Don’t worry – We will guide you through each step.

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Your Information

We’ll walk you through our application process. But, if you want to prepare for your debt free assessment consultation in advance, download our information form and fill in what you can.

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Ready to Be Debt-Free?

If you’re ready to be debt free, it’s time to meet with one of our knowledgeable Licensed Insolvency Trustees at your convenience and get started

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