Should I Use Home Equity to Pay Off Debt?

Should I Use Home Equity to Pay Off Debt?

Written by Fairstone
Fact-checked by Caitlin Wood
Last Updated August 2, 2021

For this post, we’ve teamed up with our partners at Fairstone

If you own your home, you have the option to secure your loan with home equity. Although people may be hesitant to use a secured loan or a home equity loan to pay down debt, there are several reasons why it may be your best option.

Our partners at Fairstone shared three main situations when they recommend a secured loan for consolidating debt:

1. You have high debt balances

Simplifying your payment schedule is a good first step when it comes to paying down debt. A debt consolidation loan can be used to pay off all of your outstanding bills, leaving you with a single loan and one manageable loan payment. If you have very high credit card or loan balances, you may need to tap into home equity through a secured loan to access more money and pay off those bills. 

At Fairstone, unsecured loans go up to $25,000, but homeowners can back their loan with home equity to access up to $35,000. 

2. You’re looking to reduce the amount of interest you pay

When you choose to secure your loan with home equity, your lender gains confidence that you will pay the loan back and make on-time payments. As a result, secured loans offer the best value for homeowners when it comes to interest rates. A lower interest rate can help you pay down debt faster and makes payments more budget-friendly. 

Additionally, if you have a history of missed payments, you may have limited access to different types of credit and loans. Lenders may also offer you a higher interest rate if your payment history indicates you’re a riskier borrower. If this is the case, a secured loan can help you access the lowest rate available to you. 

3. You’re looking for your lowest payment option

Debt repayment can put a dent in your budget. If you’re looking to reduce your payment amount and give your budget flexibility, a secured personal loan may be the answer. 

A secured loan lowers your loan payment in two ways:

  • A lower interest rate will lower the amount of money you pay back over the course of your loan 
  • A longer loan term can spread your loan payments over a longer period of time

With Fairstone, you could take up to 120 months (10 years) to pay back a secured loan. The longer your loan term, the more affordable your loan payments will be. Just be aware that the longer your loan term, the more interest you’ll pay over the course of your loan.

Interested in finding out how a secured loan can impact your loan payments?

Use Fairstone’s interactive loan payment calculator to find out how loan type affects loan payments. Enter the amount of money you want to borrow, choose your payment frequency and toggle back and forth between loan types for a payment estimate. 

Are you ready to take the next step towards paying down debt? Go to Fairstone.ca to get a loan quote and to find out how much money you could qualify for and what your payments might be. No obligation and no impact to your credit score. Connect with a Lending Specialist and let them know you’re interested in a secured loan so they can update your quote with the best payment and rate for you.


Rating of 5/5 based on 1 vote.

Fairstone Financial is a leading alternative lender in Canada, they have been helping Canadians since 1923. Their mission is to provide Canadians, with fair to good credit, with an affordable alternative to payday loans.

Click on the star to rate it!

How useful was this post?

Research & Compare

Canada's Loan Comparison Platform

Largest Lender Network In Canada

Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.

Make Smarter Borrowing Decisions

Whether you have good credit or poor credit, building financial awareness is the best way to save. Find tips, guides and tools to make better financial decisions.

Industry Spotlight

What's happening with Canada's credit industry?

goPeer — Helping Consumers Achieve Financial Freedom by Connecting Canadians Looking For Financing With Canadians Looking to Invest

goPeer — Helping Consumers Achieve Financial Freedom by Connecting Canadians Looking For Financing With Canadians Looking to Invest

goPeer is Canada's first consumer peer to peer lending platform and connects creditworthy Canadians looking for a loan with everyday Canadians looking...

Read Post
Locator
Find The Best Rate
In Your Region
OR
Best Personal Loan Provider by Greedy Rates
Icon

Confidential & risk-free

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.

When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.

Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. Nothing on this website constitutes professional and/or financial advice.

Your data is protected and your connection is encrypted.

Loans Canada Services Are 100% Free. Disclaimer

Keep Track Of Your Credit Score

Subscribe with Credit Verify to monitor your credit rating and get your free credit score.