With the way things are in the economy at the moment, many Canadians are finding it hard to see beyond all of the bills that are mounting up with no clear way to pay them. It can be very frustrating t try and get on top of everything and you may find yourself saying, “What am I supposed to do?!" if this sounds familiar than one of the things you may want to consider is debt consolidation.
Key benefits of debt consolidation
- Single monthly payments (easier to manage)
- Typically at a lower interest rate
- Save on higher interest payments (ie. credit cards)
Debt consolidation involves taking a single loan, typically from one bank or lender, and then repaying all your outstanding debts to several of your creditors all at once. This leaves you with one single loan to one financial institution. There can be many benefits to debt consolidation in Canada including making your debts easier to manage with one single payment, many times you can also lower the interest rates you were paying, which will save you money on interest payments, this is especially true if you were borrowing using financial products that charged punitive interest rates such as credit cards.
There are many different ways you can arrange for debt consolidation. The first thing many people do is approach their current bank or credit union. This is a great place to start, but as always, make sure you compare interest rates to find the best deal, and it always helps to speak to an expert to help you out such as a mortgage broker or financial planner, who deal with these types of situations daily. You can also go to a debt counsellor. The debt counsellor will negotiate with your creditors for a lower payment or to cancel the debt entirely. Cancelling the debt is very rare, so do not plan on that. Many debt counsellors will consolidate the debt to one low payment allowing for more money in your pocket while allowing for not only the debts to be paid off but also for a fee to their company.
Another way to accomplish debt consolidation is through the use of a second mortgage on your home. This can be a quick and efficient way to consolidate debt. This is done through the use of the equity in your home. Much like a debt counsellor, there will be a fee for this service. The difference though is that you will be able to pay off the debt all at once instead of over a length of time. This can save much aggravation on your part. However, just like your first mortgage you will have monthly payments on the money in which you borrow.
There are several things in which you will need in order to accomplish a debt consolidation regardless of the way that you choose to go. The first of which is that you will need to have proof of your income, all of the bills that you want to consolidate and a credit check. The credit check will insure that you have not missed anything as well as show the counsellor or lender how much assistance you need. Not everyone will qualify for a second mortgage, but all will qualify for the services of the debt counsellor to consolidate the debt that you owe in Canada as well as other places.
Debt consolidation in Canada could be attractive to you if you have a decent credit rating and have many debts with various creditors. It can be an attractive alternative if you would like to improve your credit rating, buy a home or car or to just have more money in your pocket at the end of the month. Make sure your credit score is at a good level, run a credit report on yourself at least once a year to check if there are any discrepancies on there. If there is, take active steps with the companies in question to resolves the issues, and try and make regular payments where possible It looks as though the economy is going to make things tougher over the next few months, so why not make life easier where you can, and debt consolidation may be one of the ways to help you do this.