January 19, 2022
Debt consolidation can make a difference if your situation is right. Here’s how to know if debt consolidation can help you and how it works.
Most of us don’t just have one debt, we have multiple debts. Credit cards, loans, or utility bills, with varying due dates and interest rates, which can add stress and make budgeting harder.
When you’re struggling to make headway because of high interest rates, debt consolidation might be a helpful solution. Not only does debt consolidation simplify paying down your debts but also has the potential to save you money as well. Debt consolidation won’t work for everyone, but there are signs that it’s the right choice for you.
Financial institutions, such as banks, offer debt consolidation loans as a method of restructuring your debt to simplify repayments and potentially save you money.
When you consolidate your debts, you combine them into a single monthly payment at an interest rate that is often lower than that of a credit card. By doing so, you can benefit from potential savings and a more manageable approach to repaying your debts.
If you choose to consolidate multiple high-interest debts, you’ll save money in the long run.
Debt consolidation does not lower the total amount you owe, though. You are still responsible for paying back all of your debt, plus interest. Your bill will be lower each month due to the lower interest rate, though.
Another advantage of debt consolidation is that your credit score will not suffer a major setback. Keeping up with the payments for debt consolidation can actually raise your credit score over time.
If you’re able to meet at least the minimum payments on your debts but feel overwhelmed by managing multiple bills, debt consolidation could be a helpful solution.
Lowering the interest rate will allow you to pay off more of the debt each month, allowing you to become debt-free faster.
Consolidating your debts into one payment can also reduce the stress of tracking various due dates, lower the risk of missed payments, and simplify your budget.
If keeping track of what bills, you have and when each one is due is hard for you to keep track of then debt consolidation can help. Missing a payment can often result in late fees you want to avoid.
It’s easy to feel overwhelmed by the different deadlines, amounts, and interest rates. Debt consolidation allows you to combine all those debts into one single monthly payment, which means you only have one due date to remember.
This not only reduces the chances of missing a payment but can also help you focus on a clear debt repayment plan, making it easier to manage your budget and avoid costly late fees.
If you find that high interest rates are eating up most of your monthly payments, debt consolidation might be the answer.
When interest charges area making it hard for you to get ahead of your debt it can feel like you’re barely making a dent in the principal balance.
If debt consolidation, allows you to have a lower interest rate, more of each payment will go toward reducing your actual debt rather than just covering interest.
So if you have debt on multiple credit cards and are looking for a easy way to reduce the cost of paying it back, debt consolidation may be the answer.
If debt consolidation isn’t enough to help you manage your debt, then a consumer proposal might be.
A consumer proposal is an agreement you make with your creditors with the help of a Licensed Insolvency Trustee (LIT). It acts as both an organized payment plan and a form of debt forgiveness. A consumer proposal can include most unsecured debts but not secured debts like a mortgage or auto loan.
When you meet with an LIT, they’ll help you figure out your income, assets, liabilities, and expenses. This will determine how much of your total debt you can afford to pay. With this information, your LIT will create a consumer proposal that outlines your monthly payments and your repayment period, which can be as long as five years.
The total value will almost always be less than your original debt. Once you pay it off, the rest of your debt will be forgiven, so long as you agree to attend two debt counselling sessions to help you stay on track.
Your LIT will present this agreement to your creditors on your behalf. If they agree, all interest charges will stop, debt collectors will stop contacting you, any wage garnishments will be stopped.
You won’t lose any assets, meaning you can keep your home and car.
A consumer proposal is helpful if you’re overwhelmed by the number of monthly payments you have. Instead of paying creditors individually, you make a single payment directly to your LIT. They’ll distribute the money to each of your creditors until you meet the terms of your proposal. Then you’ll be debt-free.
Only a Licensed Insolvency Trustee can file a consumer proposal on your behalf.
For more information about consumer proposals, please visit our consumer proposal FAQ page.
Debt can feel like an isolating experience, but you don’t need to handle it on your own. The first consultation with a Licensed Insolvency Trustee is free, and they can help you choose which debt relief option best suits your unique situation.
If you have any more questions, reach out for a free consultation with a Licensed Insolvency Trustee today. They can lay out all your options, including debt consolidation and a consumer proposal, to help you find the right solution for you.
January 19, 2022
Debt consolidation can make a difference if your situation is right. Here’s how to know if debt consolidation can help you and how it works.
