Start the Year with Debt Consolidation

January is a stressful time for countless Canadians who may have financially overextended themselves during the holidays. Along with going back to work, many grapple with debt built up over the holiday season. As a mortgage broker, you have an opportunity to help these borrowers start the new year right with debt consolidation.

We explain why borrowers struggling with debt may consider refinancing their mortgage, and how mortgage brokers like you can help improve their financial situation with debt consolidation.

Why debt consolidation?

For borrowers struggling with debt, one of the biggest causes of stress is having to make multiple payments to multiple lenders. Even when they pull together the money to make one payment, there are still several other payments weighing on their mind. This kind of stress can take a huge emotional toll.

With debt consolidation, borrowers can refinance mortgages and multiple high-interest debts into a single monthly payment, often at a more affordable rate. Although taking this step doesn’t magically eliminate their debt, it does provide more certainty and greater peace of mind.

In addition to bringing everything together into a single payment, debt consolidation also offers opportunities for increased flexibility. As an example, this may mean switching from monthly to weekly payments, or shortening or lengthening the amortization period. The focus is always on achieving better alignment between the borrower’s financial responsibilities and capabilities so they end up in a better position.

Historically, a borrower may have applied for a new line of credit to pay off high-interest credit card debts. These days, however, qualifying for an unsecured line of credit is becoming harder unless the borrower already has an excellent credit score. This is where mortgage refinancing can play a key role.

How Pillar can help

At Pillar, we regularly help borrowers consolidate their debt through mortgage refinancing. Although our mortgage rates are higher than institutional lenders’ rates, they are considerably lower compared with high-interest credit cards. Our rates can create significant savings for borrowers by bringing together all their debt into a single payment.

As a solutions-based lender, we always look at the whole picture when you submit a deal to us. We can help borrowers with damaged credit by considering their overall situation and pricing to risk, rather than simply saying “no.” However, one key requirement is that borrowers must have equity in their home.

Since their mortgage debt is not reported to credit bureaus, mortgage refinancing can help borrowers repair their credit score by eliminating their high-interest debts. This becomes a stepping-stone to takeout financing with better terms after 1–2 years with Pillar.

Key things to remember:

• Pillar typically charges interest rates of 8–12%
  
• We may add a premium depending on the borrower’s risk factors (e.g. unpaid income tax)
  
• Pillar typically lends for 1–2 years
  
• Refinancing involves the same costs as a typical mortgage deal (e.g. appraisal, lawyer, etc.).

Submit your deals for debt consolidation

Pillar provides mortgages that put your clients in a better financial position. By refinancing their existing mortgage and consolidating their debt, we help your clients come away with lower monthly payments, lower interest rates or both.