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.
