Debt Consolidation loans available in Ontario – a solution amidst COVID
As of the writing of this post, the world is still in the grip of the COVID-19 pandemic. Aside from the devastating effect that it has on people’s health, the accompanying economic slowdown is having a devastating effect on businesses.
Effect of COVID in Ontario on employees
- Unemployment or
- Underemployment
With so many businesses – both local and international closing down or implementing cost-cutting measures, unemployment is a very real possibility for many Ontario residents during the COVID-19 pandemic.
Even if their company is not laying off people, they may find themselves furloughed or asked to work from home or placed on different work shifts. These measures to decrease operating costs and increase worker safety have the negative result of reducing work hours and in many cases reducing earning capacity.
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Effect of COVID in Ontario on small and medium businesses
- Reduction in profits
- Need to change business practices
For small and medium business owners in Ontario, quarantine measures are making it hard for them to keep their daily operations running.
Even if they can operate during the pandemic, chances are they aren’t seeing as much business or the strain of having to implement new operating procedures to help protect their employees and customers are eating their profit.
Risk of debt in Ontario due to COVID
Because everyone’s earning ability has been negatively impacted by COVID-19, many people will find it hard to keep up with their daily expenses and meet their monthly financial obligations.
If you were already struggling to pay your home loan, racking up credit card debt due to a loved one needing to be hospitalized, after a COVID-19 scare could strain your finances to the breaking point.
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If you are a store owner who took a loan to renovate a store you can no longer open, you could find yourself dipping into your own savings to not just keep up the debt payments but pay your employees’ salaries.
In these cases, the best thing to do would be to look at the available debt consolidation loans in Ontario.
What debt consolidation loans are available in Ontario?
A debt consolidation loan is a loan that you take on to pay off multiple loans. So instead of struggling to pay off multiple loans you just need to make the payment of your debt consolidation loan.
The advantage to a debt consolidation loan is that it has a lower monthly interest rate than many other types of loans available in Ontario. Because of this, it’s easier to budget and remember to set aside the amount you need to make your monthly payment. You also avoid any late fees and penalties and any negative impacts on your credit score.
What are the types of debt consolidation loans in Ontario?
1. From a local bank or credit union
These financial institutions offer debt consolidation loans at lower interest rates than other types of loans. Most banks in Ontario provide debt consolidation loans with interest rates of about 7 to 12%. Credit unions, meanwhile, will probably charge you an interest rate of 14 to 30%.
Take note, however, that they usually require you to have collateral, such as a vehicle or a home. If you default on your payment of your debt consolidation loan, and are overdue for 90 days, then that asset may be repossessed by the lending institution.
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If you don’t have anything that you can put up as collateral, they may still give you a debt consolidation loan if you have a guarantor. However, given how the COVID-19 pandemic in Ontario is impacting everyone’s finances, you might find it hard to find someone in a strong enough financial position to be a guarantor.
2. From an online lender
Online lenders provide debt consolidation loans and they are very convenient. However, the debt consolidation loans offered by online lenders usually have some of the highest interest rates for this type of loan in Ontario – from 30 to 50%.
3. With a credit counselor
If you decide to work with a credit counselor, one of the options that they will propose will be a debt consolidation program. This isn’t a loan in the traditional sense but the end result is the same, you make one monthly payment to pay several debtors. This payment – and a service fee – will be made to your credit counselor who will pay your debtors on your behalf.
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