When looking at your current financial constraints, you can help thinking that there is no hope left for you to pay off your debt. You tend to feel the burden of your debt and perceive it as inevitable. Individuals who are suffering from their consumer debt usually deal with disappointments, anxiety, and distress. In some cases, it may be the reason for family members to be distant from each other. These issues are significant; however, Canadians are fortunate that there are several options available in Canada that can help them overcome their consumer debt burden. Canada has several debt-relief options, such as debt consolidation that enables an individual to cope up with their consumer debt through an affordable single payment every month.
Debt Consolidation Loans Canada
There is an evident increase in the number of Canadians who are seeking assistance in reducing their debt payments. One of the means that has been considered by the residents is debt consolidation loans. Debt consolidation loans allow you to combine all your high interest debt into a single debt that has a lower interest. Through a debt consolidation approach, you can conveniently turn your several obligations each month into one lower payment each month. For instance, if you have five credit card bills, you can get a debt consolidation loan to fuse all your credit card bills into a single payment which is more advantageous in terms of the amount that you’ll be paying each month and its convenience.
Pros and Cons of Consolidation Loans
To evaluate if your situation calls for debt consolidation loans, it is imperative to understand both the pros and cons when considering this debt relief approach. The following can serve as your guide to determine if getting a debt consolidation loan is what’s right for you.
Pros of Debt Consolidation Loans
Single Payment Each Month
Since your debt is being consolidated, you will no longer pay to several creditors nor to different banks. If you owe to several creditors, it is possible to miss payments, which in turn can impact your credit badly. It is more convenient if you will only be paying a single payment each month for all your debts.
Reduced Interest Rates
Usually, you can get a lower interest rate in a debt consolidation company as opposed to the interest charges that you’re getting from your credit companies. If you’re paying for several credit card bills each month, getting a consolidation loan can save you money as it can help you eliminate your debt completely by paying a lower interest on your loan. Since your monthly payments are lowered, you can then add the money you save to pay for your loan principal. By doing so, you can pay off your loan in a shorter period of time.
Low Monthly Payments
In debt consolidation, you are normally offered a lengthy duration of repayments to ensure a low payment each month.
On-time Payment to Creditors
Your creditors will receive your payment on time, which will prevent the risk of affecting your credit repute. A debt consolidation plan aims to protect your credit rating as it promotes up to date payment of your debts.
Reducing Stress from Creditors
A debt consolidation approach will put an end to debt collectors’ calls since it will imply that debt has been settled.
More Feasible Household Budget
Since you’ll only be paying one payment each month, you’re household budgeting plan will also appear to be more manageable.
Cons of Debt Consolidation Loans
Do NOT Lower the Debt Principal
Debt consolidation in Canada is perceived to be the most preferable dent solution for people who want to eliminate their debt. Although it is more convenient to get consolidation loans rather than paying to a bunch of creditors, it is not always the best option for your situation. In fact, several individuals who consider this alternative turn out to accumulate much more debt than they had initially. This is because consolidation loans do not lower your principal debt. Though it lowers your interest charges yet you still have to ensure payment of the total amount that you owed after debt consolidation.
May NOT Shorten Your Payment Terms
debt consolidation may not decrease the span of time to pay off your debt
Debt Settlement vs. Debt Consolidation Loans
As compared to debt consolidation, debt settlement can get you faster out of indebtedness. With a debt settlement approach, your creditors will agree to set aside your debt principal. This would make your debt lighter as it will reduce the duration of time that you’ll be paying for your debt. Besides, apart from forgiving your debt principal, your average interest rate is also lowered making it more feasible for you to manage your payment each month.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
|2||Credit card 1||$6,812|
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.