Consolidation helps heavily indebted borrowers to reduce their debt burden and repay all outstanding balances faster, making payments more manageable and easier to keep up with.
What Is Debt Consolidation
Consolidation is an alternative to bankruptcy and a form of refinancing, the ultimate goal being debt relief. This is a process that combines two or more debts into a single balance to reduce the payment or interest rate. This is one alternative to consumer proposal that helps borrowers manage credit card, consumer, student loan, and other types of debt that are not tied to a guarantee or collateral.
How Does Debt Consolidation Loan Work
Debt consolidation loans are usually unsecured but there is an option to add outstanding balances to your mortgage provided that there is enough equity. The main difference between both is the fact that your home serves as collateral. Another difference is that mortgage debt comes with a lower interest rate and again, this is because financial institutions perceive you as low-risk because of the asset pledged as collateral.
Who Offers Debt Consolidation Loans in Canada
There are many major, regional, and small banks that offer debt consolidation in the form of personal loan to combine high-interest balances. Major financial institutions such as TD Canada Trust, the Royal Bank of Canada, and others offer consolidation loans to their customers. RBC, for example, offers the option to use a loan or line of credit to consolidate two or more loans and credit cards to benefit from a reduced interest rate. There are also reputable services that offer professional advice on debt and personal finance.
Consolidated Credit Counseling Services of Canada
Consolidated Credit Counseling Services of Canada has helped many customers to reduce and eliminate their debt burden. Customers are offered different debt solutions and financial advice on marriage and money issues, planning for retirement, ways to rebuild and build credit, how to consolidate and manage debt, and a lot more. The goal is to help customers to improve their financial literacy and avoid excessive debt. Free debt analysis is offered online as an added benefit.
Credit counseling is one option to deal with excessive debt and learn how to manage debt and your finances. Borrowers benefit in many ways, one being the fact that they are able to pay off their bills and credit card debt and increase their credit rating. What is more, penalties and late fees are eliminated, and customers save thousands of dollars in charges and interest. Borrowers who opt for consumer proposal work with trained and certified professionals, and counseling is usually confidential and free. This is also an option to avoid bankruptcy and an alternative to debt restructuring, negotiation with creditors, and other solutions. Borrowers no longer receive multiple calls from financial institutions and enjoy an affordable monthly payment. They are offered debt management and budget information for free and learn how to cope with stress.
Counselors at the Consolidated Credit Counseling Services offer advice on different debt management programs and the first step is to assess your financial circumstances. To be able to do this, they need information such as your total outstanding debts and monthly income, interest rate on all cards and outstanding loans, and additional expenses such as gas, insurance, mortgage or rent, and other expenses.
Credit Canada Debt Solutions
Professional services are offered to borrowers, including online debt assessment and financial advice. Customers learn more about finance management and debt management programs. Working with a financial coach is a great way to learn about financial planning and benefit from a host of money management tools.
- Review your budget to make sure a program is right for you – There is a large selection of debt solutions, with credit counseling as one option whereby the borrower meets with a counselor to discuss his debts, assets, expenses, income, and financial situation in general. The counselor reviews indicators such as debt to income ratio, credit rating, and others. This helps counselors to find the best solution based on the customer’s financial circumstances. Debtors learn how to choose from different financial solutions and how to use credit cards.
- Work with your creditors to reduce or remove interest – Working with a professional is one way to remove interest or benefit from reduced interest. Lower interest means reduced monthly payments, and paying more toward the principal balance which allows borrowers to repay their loan faster.
- Set your monthly payment at an amount you can afford – Obviously, reduced interest means monthly payment you can afford to make so that you have enough money for basic necessities such as food, rent, and utilities.
- Teach you about budgeting and setting financial goals – The good thing about counseling is that borrowers are offered helpful information that enables them to set financial goals and review their budget. Customers learn how to keep their spending under control to achieve short-term and long-term financial goals.
Credit Counseling Society
The Credit Counseling Society offers debt help and tools to use credit in a wise manner and avoid major debt problems. Customers learn more about debt settlement and debt consolidation as well as alternatives such as bankruptcy and consumer proposal.
The Society also offers referral services and advice, budgeting assistance, money management education, and more. Customers benefit from professional non-judgmental and confidential services free-of-charge.
Benefits of debt consolidation loans
Debt consolidation loans offer multiple benefits to borrowers who are struggling with debt – from the opportunity to rebuild credit to avoiding bankruptcy.
- Stop harassing collection calls – Collection agencies can be annoying to deal with when you are unable to make payments. A debt consolidation loan is one solution to your financial worries and a way to stop harassing calls.
- Improve your credit – Being able to make regular payments on time helps build a healthy score over time. A good credit score and payment history opens many doors because financial institutions consider you a trustworthy borrower.
- Avoid bankruptcy – Bankruptcy takes different forms and is usually the preferred option of borrowers with unsecured loans who experience major financial difficulties. This is a serious financial decision that will affect your credit and ability to access financing in the future. Credit counseling helps borrowers to avoid bankruptcy through different settlement, repayment, and consolidation programs.
- Reduce or eliminate interest charges from credit cards – Debt consolidation is a good way to benefit from a reduced interest rate on credit cards. What you can do is transfer existing balances with high charges to a card with a low promotional rate. Such balance transfer cards are offered by many big and local banks with a promotional period of up to 18 months.
There are other benefits to debt consolidation – this is a way to simplify your finances and streamline payments. What is more, this is an unsecured loan meaning that you don’t risk losing your home or another valuable asset pledged as collateral. The main downside is that unsecured loans come with a higher interest rate because they involve more risk than unsecured loans.