Debt Consolidation: Should You Combine Renovation Debts?Jul 18, 2017
Have you taken on a bit more debt than you can handle? Have low interest rates made borrowing more appealing? You may want to consider debt consolidation to deal with debt ahead of another interest rate hike, especially if you’ve been adding to your debt this summer with a renovation project.
Adding a personal touch to your home can make it feel warmer and more inviting to guests, which may be why Canadian millennials are leading the country in home renovation projects this year. They’re the most likely to:
- Take the DIY approach vs. hiring a contractor
- Borrow money to complete the job
- Have a lower budget to work with compared to baby boomers
Albertans will spend an average of $22,586 this year on renovations. If you’re already paying back student loan debt and existing consumer debt, this might lead to a sticky situation, especially if interest rates rise again in the near future.
What to do and when to take action
Renovating often increases your home’s value, but also tends to cost more than you expected. In fact, 33 per cent of homeowners fear they will find bigger and more expensive problems once they start renovating. Here are some ways to lower your expenses and minimize your borrowing:
- Follow a budget
40 per cent of renovators say they haven’t set a budget yet, which can definitely add to expenses. Use the SMART goals worksheet to help detail your renovation timeline and the FCAC’s Financial Goal Calculator to plan your project.
- Monitor your debt
Don’t borrow more than you can manage. Know the warning signs of carrying too much debt and make efforts to pay down debt regularly.
- Consolidate debt
Whether you speak to your bank about a debt consolidation loan or consider the help of a debt professional, combining your debts can make them easier to pay back. A debt consolidation loan can combine several outstanding debts into one monthly payment, often with a lower interest rate.
- Don’t rely on low rates forever
As the economy recovers and GDP increases, so do the chances of interest rates rising once again. Homeowners with a large mortgage or those who are funding their renovations with a Home Equity Line of Credit (HELOC) should be very cautious about borrowing more than they can afford to pay off.
Are you remodeling your home this summer? How will you keep your debt to a minimum? Share your tips using the hashtags #HomeReno #DebtSolutions