If you feel like you’re drowning in debt, you’re not alone. The problem is so pervasive throughout our society that there are now credit counseling services devoted exclusively to Debt Solutions!
For people overwhelmed by debt, one of the most demoralizing aspects is the unmanageability of the many different loans, credit accounts, and payments. It feels like there’s always another payment coming due, another payment missed or overdue, and others pending. You probably dread the arrival of the mail carrier because he always brings another bill, collection letter, or threatening notice. You probably don’t pick up calls from unknown phone numbers for the same reason.
If this describes you, take heart! There’s a solution just waiting for you. It’s time to consider debt consolidation.
How Does a Debt Consolidation Loan Work?
Debt consolidation in Canada is essentially the process of putting all your various debts and payments under one umbrella. When you’re finished, you’ll have just one extant loan, and one monthly payment. You’ll be paying less interest overall, and you won’t be swamped by all that demanding mail and all those threatening phone calls from bill collectors.
To get your debt consolidation loan under way, you will first need to gather up the paperwork on every debt you have. That includes bank loans, payday loans, title loans, credit card balances, mortgage, and every other form of debt you owe.
Once you have collected all that paperwork, you’ll want the assistance provided by credit counseling, with an experienced professional to guide you through the necessary steps. Your credit counselor will use the information you’ve gathered to determine exactly how much you owe in total, adding up your home and car loans, your credit cards, and all the other commitments on which you owe.
With that number in hand, you will know exactly how much you’ll need in order for a debt consolidation loan to cover your existing obligations. At this point the goal is to apply for a loan that will enable you to pay off all of your debtors. That’s right, you’ll pay off your car, your house, your credit cards, and every other loan that’s accruing interest and attracting the attention of bill collectors.
Now you have a single loan, and because its interest rate will be lower than the rates of many of your previous debts, your overall monthly payment will be lower than the total you were paying before.
Benefits of Debt Consolidation Loans
The benefits of debt consolidation are many, and readily evident:
Single payment.
You have been getting multiple statements, bills, invoices, and collection letters for the various obligations you owe. That’s an overwhelming amount of mail, and an impossible number of payment due-dates to keep track of. With consolidated credit in Canada, you’ll have just one loan, one statement, and one payment each month. Imagine the extra time you’ll have once the hassles of multiple debts have been resolved!
Lower payment.
Not only will the number of your payments decrease, but also the total amount of those payments will diminish. Credit cards, payday loans, and title loans all charge extremely high rates of interest, and once you’ve gotten behind on your payments, you’ve been paying a whole lot of extra money just toward the interest. With debt consolidation loans in Canada, your single loan will have a much more reasonable interest rate, so your total monthly payment will be considerably lower.
Pay down debt faster.
Less of your money will be going to interest with your debt consolidation loan, which means you can pay down the actual debt much faster! With lower amounts due each month, you will be able to afford to pay down the principle on your loan that much more quickly.
Improved credit rating.
When you have a dozen different payments due at different times, it’s almost impossible to keep track of them and keep up with them. Your credit rating has probably taken a big hit due to missed and late payments, but all that bad credit is about to change. When you only have one single payment to make each month, you can make it a priority to get that payment in on time. Watch your credit rating improve as you pay off your original debts and loans, and make your new payments on time every month.
Debt Consolidation Strategies for Canadians
Add the debts to your mortgage.
If you have an existing mortgage on your home, that can be a good opportunity for consolidating your other debts. You can refinance for a new mortgage in an amount that will cover your various debts as well as the amount still owed on the home. Or you can take out a second mortgage, or home equity loan, against the equity you have in the home.
Using a mortgage to consolidate your debts will usually get you a low interest rate and sufficient funds to pay off your debts. The lender has the collateral of your home to secure the money, so you are not considered a high-risk prospect.
Get a debt consolidation loan.
A debt consolidation loan encompasses all of your current debts, allowing you to pay them off and go forward with a single, low-interest loan. Your best bets for consolidation loans will probably be banks or credit unions. The lender will assess the worth of your assets and income and your credit rating, among other factors. If you have a pre-existing relationship with a bank, you may enjoy better terms with that bank than with one where you don’t have a history. A credit counselor can help you identify and apply for a debt consolidation loan that suits your circumstances.
Consolidate with credit cards.
Some people use their existing credit cards in such a way as to minimize the interest owed, and reduce the number of different debts. They do this by transferring all their balances to the card with the lowest interest rate. If you can get a card that has an especially low rate (or an introductory period in which no interest is charged), that type of card is ideal for this purpose. With this approach, you will lower your overall owed interest, as well as streamlining your outstanding debts.
File a consumer proposal.
A consumer proposal consists of a legal filing in which you propose a payment amount that’s less than you’re currently paying. This is an option if you don’t qualify for a consolidation loan and don’t want to declare bankruptcy. If the creditors holding more than half the debts agree to the filed proposal, you may be able to clear your debts with a lesser payment than what you currently owe.
Borrow from family or friends.
Do you know someone who has the resources to help you out with your debt consolidation? You can work out a private arrangement wherein you agree to pay back (probably with a certain amount of interest) the money you borrow now to pay off your high-interest debts. Your lender will benefit from getting the interest, making it essentially a low-risk investment where they’ll earn better interest than if that money were sitting in a savings account. And you will benefit by being able to pay off your high interest obligations and get right to the business of paying down your debt. It’s a good idea to sit down with your lender and forge a written agreement about your loan. That way you can avoid any misunderstandings or hurt feelings; after all, you don’t want to lose a friendship as the price of reducing your debts!
Talk to a credit counselor.
If you find the options overwhelming, or aren’t sure what choice would work best for you, seek the advice of a credit counselor. There’s more to it than simply replacing your existing loans with a new one; you’ll also want to make some changes to your finances so you don’t find yourself mired down in debt again. There’s no one more experienced and savvy than a credit counselor when it comes to debt consolidation loans in Canada.
Who Offers Debt Consolidation Loans in Canada?
Consolidated Credit Counseling Services of Canada offers everything you need to get a handle on your debts. You can apply online, request a call, or phone them at your convenience to get a start on consolidating your debts.
Whether you are trying to recover from (or avoid) bankruptcy, have gotten behind on utility bills or rent or other expenses, or are just struggling with your debts, CCCSC can work with you to find debt solutions and financial advice as you go forward.
Debt consolidation goes hand-in-hand with making financial changes to avoid debt troubles in the future, and your credit counselor will be right there with you as you tackle your financial habits and consolidate your debts. You will find that it’s not sufficient to merely lump your existing debts together with debt consolidation; you will also need to fundamentally change the way you handle your money and finances. A change in habits, combined with a debt consolidation approach to your existing outstanding balances, will do the trick for you!
It can truly be overwhelming to try to get a handle on your debts when they seem to be coming at you from all directions! It’s hard to figure out how to prioritize the various debts and payments, and it’s hard to come up with the money for each of those payments as they come due in their turn. More than anything, it’s just hard to get your head around the whole mess and figure out how to come out on top.
That’s why credit counseling and debt consolidation loans in Canada hold the key. With a consolidation loan you can look forward to eventual freedom from debt, and peace of mind in your near future!