When debt is taking over your life it can be difficult to see the light at the end of the tunnel. Mounting monthly payments that include mostly interest can become difficult to meet and missed payments can lead to collection calls or other enforcement action. You are not alone – many Canadians are dealing with heavy debt loads and don’t know where to turn. This 3rd blog in our ‘getting out of debt blog series’ talks about debt consolidation and provides you with the information necessary to help you determine whether this is the best route to take for getting out of debt.
What is debt consolidation? It is pretty straightforward – a consolidation of your debt into one monthly payment, saving you thousands of dollars in interest and making the monthly payment far more manageable. It is a loan given by a financial institution which allows you to pay off all of your unsecured debts to creditors at once (secured debts such as car loans or mortgages are typically never included).
A debt consolidation can be achieved through a secured or unsecured loan or line of credit. Secured consolidation loans often involve a house, vehicle, investment or guarantor as security.
Obviously if you obtain a debt consolidation, your credit is paid off and the result will be no further collection or enforcement action by your creditors. Debt consolidations will also in some cases lower your interest rates and monthly payment. If you have damaged your credit, or are having enforcement action taken against you by your creditors and have no assets to pledge as security – being approved for a debt consolidation can be challenging.
Debt consolidation is not for everyone. Often in order to qualify your credit needs to be acceptable since the institution lending the money will want some indication that you will be able to make the required monthly payments. If your credit rating is less than stellar it might be more prudent to consider some other alternatives. The more bruised your credit is, if approved, the higher the interest rate on the debt consolidation will be, which may leave you in no better shape than when you started.
A smart way to determine how best to approach your ‘getting out of debt’ solution is to speak with a professional debt consultant, one experienced with helping Canadians find effective forms of debt relief. A consultant will be able to go through all of your financial obligations to help determine what means for getting out of debt are best suited to your unique situation. He or she will also be able to get the ball rolling and get you started on a debt-free road as well as help you to budget realistically for the future.
If you are in debt that you feel is becoming tough to manage it is probably time to consider getting some help. Don’t wait until the debt takes complete control.
For more information about debt consolidation or getting out of debt please contact DebtCare Canada by calling 1-800-890-0888 or visiting us online at www.debtcare.ca.