Learn how Canadian Debt Consolidation can help you this 2021.
If you are struggling with debt in Canada, don’t despair. There are a number of very efficient debt relief programs offered by debt consulting companies that can help people meet their financial obligations and achieve a debt-free life.
One good option for those seeking to become debt free is a debt consolidation program. This is especially good for people who are struggling with multiple debts and are getting stressed out remembering to make all of their different monthly payments.
What is debt consolidation?
Debt consolidation is a debt relief plan in which multiple sources of debt are merged into one. Instead of having to remember to make multiple monthly payments to different creditors, you only need to make one monthly payment – towards your debt consolidation loan.
A debt consolidation loan is a loan that you can take out to pay off your other monthly loans. There are several advantages to paying off your loans this way.
1. Easy one time monthly payments
If you take out a debt consolidation loan, you now only have to make one monthly payment.
If you have several sources of debt that you need to pay, for example a credit card and a line of credit, chances are you don’t pay them at the same time. They have different due dates. It is also possible that there are different payment methods for each, as well as different interest rates.
For example, your credit card bill due date is every 30th of the month and you can pay it using online banking. But your line of credit is due every 15th of your month and you need to deposit a check at the banks.
It can be difficult to juggle all these different payment dates and methods – and if you miss your due dates, you will incur penalties. This will increase the amount you owe and make debt payment even more stressful.
With debt consolidation, you just now have to pay that one loan at one time and in one way every month.
2. Debt consolidation loans have lower interest rates
One thing that trips up people who have taken out a loan is the interest rates. An interest rate is a given percentage by which the amount you need to pay will increase by increments every month.
The interest rate on a loan varies according to the type of loan and the loan provider. If the loan that you took out has a high interest rate, you could find yourself struggling to make the monthly payments. And these monthly payments will increase the longer you go without paying them off.
If you have multiple loans with high-interest rates, it will get harder and harder to make your monthly payments. And your debt will continue to increase.
However, debt consolidation loans typically have a lower interest rate than other types of loans. So the amount you need to pay will still increase slightly every month, but it will still be more manageable than if you had to deal with multiple loans with multiple interest rates.
3. Debt consolidation could improve your credit rating
Being in debt affects your credit score. If you miss payments, this can be seen in your credit history and could negatively affect your attempts to get a financial product in the future.
Banks and other financial institutions consider a person’s ability to pay bills and make loan payments on time and in full a factor on whether they will approve a loan or even a bank account or credit card application.
Debt consolidation makes it easier to make timely loan repayments and this will show on your credit score. As long as you consistently make your debt consolidation loan payments in a timely manner this will reflect positively on your credit score.
Debt consolidation is one of the only Canadian debt relief programs that doesn’t negatively affect your credit score.
With a debt consolidation loan, you could find yourself debt free within three or five years – and with a better credit rating to boot.