Be Debt Free in 2021!
According to Investopedia, debt relief is when debt is reorganized in a way that provides the indebted party with a respite from their payments. This is usually done by arranging it so that the monthly debt payments are reduced in some way.
This reduction in debt payments is meant to make it easier for repayment to be achieved. Many financial institutions are amenable to debt relief programs as it ensures that they get some of their money back.
Debt relief plans actually help people get out of debt without having too much of an impact on their credit score.
Your credit score is important to securing your financial future, a bad credit score will impact your ability to apply for and get approved for financial products. Banks and other lending institutions will look at this when determining whether or not to approve your loan, mortgage, or credit card application.
Go for it on your own with a debt consolidation loan.
If you have multiple sources of debt, one of the difficulties in becoming debt-free comes when you try to make all your loan payments in a timely manner. It can be a struggle to make all these payments and remember all the different due dates.
Debt consolidation is a form of debt relief where, instead of having to pay multiple bills at different times you consolidate all your bills and pay them in one payment.
In Canada, debt consolidation loans are offered to people looking for debt relief. What happens here is, you take out the debt consolidation loan to pay off your multiple existing loans. So to pay all your loans, you just need to make one payment – the payment of the debt consolidation loan.
One other reason why a debt consolidation loan is considered a good idea is, it has a lower interest rate than other types of loans.
All loans have interest rates, these are a small percentage by which the loan payment will increase every month. If you are struggling to pay a loan, high interest rates are your worst enemy because this means your loan payment will increase month by month. A low interest debt consolidation loan will be easier for you to pay off in a quick and timely manner.
A debt consolidation loan, however, oftentimes requires collateral – such as a house or car. It can also be hard to get one if your credit rating is bad. In these cases, it might be better to go to a credit counseling agency.
If you go to a credit counseling agency, you can get out of debt with the help of a credit counselor. In Canada, you can find a reputable credit counseling agency by checking and confirming that they are members of the provincial and national credit counseling associations.
Let the Debt Relief Agency do the work.
Your credit counselor from a debt relief agency will then come up with a debt management plan. They will go to your creditors and negotiate on your behalf a way to lower your monthly payments. This can be achieved by getting your creditors to agree on a lower monthly interest rate or a longer payment period.
Afterwards, instead of paying and negotiating with multiple bills, you will just make a single agreed upon payment through your credit counseling agency who will then, forward the same to your creditors for you.
Working with a credit counseling agency can save you money on your interest rates, but you will have to pay the agency a fee for its services.
It will not address the negative impact on your credit score. It will be noted that you are in a debt management plan and that could impact future credit approvals. However, once you pay off your debt, this will only stay on your credit history for about two years, which means you will have faster time to rebuild it and get approved for future loans again.
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