Using a home equity line of credit to consolidate debt and eliminate the high interest payments on credit card and unsecured loans debt is a one-time solution for middle-class Canadian households who are struggling with record high debt levels.
In a recent article, the Globe and Mail noted that, “Household debt is the new statistic of record and middle-class Canada is in a world of hurt.” A world of hurt that could lead to a double-dip recession as indebted families pare back radically on spending in order to deal with household debt levels that surpass even those of Greece.
Consolidating and paying off debt under a home equity line of credit isn’t a panacea for all homeowners, but for households with a reasonable level of home equity that are otherwise stretched with outstanding multiple, high-interest credit facilities, this is one solution out of the growing debt trap.
“Fully 43 per cent of the country says their personal finances are in either poor or very poor shape,” the Globe reports; an impression that is justified by economists who report that “household debt in Canada has never stood at higher levels.” They point to “overdrawn lines of credit, maxed out charge cards, and borrowing against declining home equity” as signs of the economic malaise many middle-class families now find themselves in.
While debt consolidation under a home equity line of credit is not for everyone, for proactive homeowners with high levels of unsecured debt yet sufficient levels of home equity, this strategy may be used as a one-time strategy to ensure that debt is paid off with a secured credit facility that has a significantly lower interest rate than the charge cards and unsecured loans they are currently paying off.
