Debt consolidation is an effective strategy that allows people to get out of debt quickly and easily with minimal effect on their credit score and their financial future.
Instead of juggling multiple creditors and worrying about making several loan payment deadlines, with debt consolidation, you just need to make one monthly loan payment.
There are four basic debt consolidation services that are available in Ontario
- Taking out a debt consolidation loan
- Having a debt management plan
- Enrolling in a debt settlement program
- A Debt Relief Program
What is a debt consolidation loan?
You can pay off multiple debts by taking out a debt consolidation loan. A debt consolidation loan is a low-interest loan that you use to pay off your other loans.
Instead of fretting over how you can make multiple loan payments – often with different interest rates and payment schedules – you just need to make one monthly payment of the debt consolidation loan and you can quickly and conveniently pay off your debt.
What is a debt management plan?
In Ontario, we have reputable credit counseling agencies which help people pay off their debt. Their credit counselors help you negotiate one consolidated payment – oftentimes with an interest rate reduction – with your creditors.
They will then help you come up with a manageable payment schedule that will allow you to pay off your debts within a given time period, usually around 3 years.
What are debt settlement services?
Debt consolidation companies in Ontario can help you settle your debts easily through a single payment plan.
Instead of making multiple debt payments with several agencies, you just need to make one single payment by paying through a debt consolidation company. The company will negotiate for you with your creditors on an agreed on payment amount to settle your debt.
What is a Debt Relief Program?
This is a debt settlement program that is provided by the government of Canada. This is a debt settlement agreement negotiated and filed between you and your creditors. A Debt Relief Agency in Ontario can help you apply for this government-approved debt forgiveness program and make sure that the terms are flexible in your benefit.
National Debt Relief Services debt consultants will negotiate for you and get your debtor to agree to accept payment of a percentage of your debt, which you will pay in interest free installments over a certain time period. After you pay off that percentage you will get debt freedom.
Why is debt consolidation in Ontario a good way to get out of debt?
- It will help you get control of your finances
One of the hardest parts of getting out of debt is keeping track of your different repayment schedules and making sure that you come up with a budget that will allow you to make these payments on time. Instead of several payments, you just need to make one payment that will cover all of your debts.
- It will reduce the interest rates of your debts
Loans have interest rates, this is a small percentage that is added to your monthly payments every with every installment. When you sign a loan agreement, the interest rate is something that you need to look at because if you are not careful it can cause your debt to balloon to an unmanageable amount – and if you have several loans it will become even more complicated as these will have different interest rates.
With debt consolidation, you can reduce the amount of interest you need to pay every month. If you opt to take a debt consolidation loan, these loans often come with interest rates that are way lower than other loans. If you opt for a debt consolidation, part of the negotiation process will be that you make your payments at a low interest rate.
- It will allow you to pay off debt easier and faster
No matter what debt consolidation strategy you decide on, the end goal is the same – to find a way to pay off your debts through an affordable payment schedule.
A debt consolidation loan ensures that your payments don’t accrue unmanageable interest so they stay low and affordable. By making sure that you can make your payments, it ensures that you pay off the loan quicker.
Debt settlement and debt management work to ensure that you pay off your debt by lowering your payments and coming up with a schedule you can easily stick to. A debt relief program is similar in the sense that you negotiate with your debtors to get out of debt by paying them off at a lower rate.