What is a Debt Consolidation Loan?
In Canada, the residents are considering alternatives to get out of their debt through the different debt relief programs. Regardless of the significant decrease of consumers getting additional consumer debt, their average amount of consumer debt continues to rise. The fact is, with the increase in the levels of debt, the interest charges also get higher. This proposition initiated a snowball effect that increases debt payments every month. If the residents are not being cautious, the tendency to miss payments on their debts is possible. Moreover, they may end up struggling to catch up with their monthly payments.
In contrast, Canadians can get aid to lessen their burden in paying for their high-interest debts. There are several solutions that they can take to end their struggles. One of which is through debt consolidation loans. Through consolidation loans, you can save huge money each month as you pay the minimum. The money that you save can then be added to your payment, which goes towards your debt principal.
The Basics of Debt Consolidation
With debt consolidation, you can get one big loan to cover the payments of your existing consumer debts. One of the chief advantages of debt consolidation is that you’ll only be making a single payment each month. This payment is normally lesser than what you are paying each month to your entire debts. By lowering the minimum payments each month, you can save more money over the duration.
Furthermore, debt consolidation varies from debt settlement. Debt settlement and other debt-relief solutions aim to lower your debt principal. This entails that the money that you can save in debt consolidation is usually insignificant compared to debt settlement. Even though debt consolidation lowers your interest rates, debt settlement can save you even more money.
However, the good aspect of debt consolidation is that it does not affect your credit severely as how debt settlement will. Besides, as compared to other debt relief solutions, debt consolidation is far better in terms of its effect on your credit. For instance, it is better compared to how will a consumer proposal impact your credit. In fact, debt consolidation can help you in getting a good credit score as you continue to be diligent in paying your monthly obligation.
Is it a good idea to get a debt consolidation loan?
If you can still manage to pay the minimum payments of your debts amounting to not more than $10,000, debt consolidation loans are commonly a good option for you. However, if your debt levels are more than the mentioned amount, it may take you longer when considering consolidation loans. Hence, if you owe more than $10,000 of consumer debt, it would be more beneficial for you to consider debt settlement. In some cases, if you can no longer endure any payments for your debt each month, you may consider qualifying for a consumer proposal or bankruptcy. You may need to understand and weigh a consumer proposal vs. bankruptcy in this case.
How Are Debt Consolidation Loan Rates Determined?
Fortunately, if you’re credit score is satisfactory, you can get low interest rates in your consolidation loans. This is because your interest rates in debt consolidation loans are calculated based on your credit rating. In fact, individuals who have an outstanding credit rating were able to perceive a reduction in their interest charges, amounting to approximately more than five percentage points. To sum it up, it will accumulate a $500 of savings in a fraction of $10,000 consumer debt, granted that the average interest rate is 10%. In this case, the amount that you save can be added to paying your debt principal.
Is Debt Consolidation the best option for me?
The best way to be certain whether debt consolidation is the right debt solution for you is to reach out to a professional service that offers a free consultation. By doing so, you can get reliable and honest help. To get the help that you need, simply follow the steps HERE.
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.