Archive for Category 'consolidation loans'

Question: I was wondering if getting a debt consolidation loan for my debt affects your credit rating or credit report at all?

Answer: In most cases successfully qualifying for a debt consolidation loan will improve your credit rating, because getting the consolidation loan is proof that you have good credit.  The only exception would be if you have borrowed more than other lenders may think is acceptable, or if you got the consolidation loan from a very high interest rate lender.

Also, if you do get a consolidation loan to pay off your credit cards, you should cancel all but one or two of your credit cards, because if you increase your debt level by continuing to use your credit cards you will ultimately make your credit rating much worse.

Question: can you consolidate all your loans, ie. car payments , credit cards , line of credit etc into one monthlty payment ensuring that all your debts are being paid but also reducing your overall monthly payments and stress?

Answer: Yes, you can get a debt consolidation loan to consolidate all of your debts.  Whether or not you qualify for the loan will be up to the bank or other lender, since qualification is based in part on your income.

Also, you should consider whether or not consolidating all of your loans makes sense.  For example, if you have a low interest car loan at, say, 5% from the dealer when you bought the car, it may not make sense to consolidate that debt into a loan with the bank where you pay 9% interest.  In general it makes sense to consolidate high interest debts, like credit cards, so you can eliminate your credit card debt and reduce the interest you are paying, which helps you get out of debt faster.

Question: My husband and I owe $96,500.00 in unsecured debt, and an additional $40,000.00 in secured debt. We do not own our own home, we rent.
We have never missed a payment nor have we ever been late on a payment. But we work to pay our debts. There is no money left over. Only the minimum is paid on our bills each month so we aren’t getting anywhere.
What would you recommend?

Answer: You have five choices.

1. Keep working hard, cut your expenses, and use whatever money have to pay off your debts, starting with the highest interest rate debts.  If you can only afford minimum payments, this startegy won’t work.

2. Get a consolidation loan from a bank.  If you have good credit, you may be able to consolidate your unsecured debts at a lower rate of interest, so that more of your payments go towards principal, and you repay your debts faster.  However, it is unlikely a bank will lend you $96,5000 with no collateral.

3. Do a Debt Management Plan through a non-profit credit counsellor.  To repay $96,500 over a 5 year period would cost over $1,600 per month, so credit counselling only works if you can afford it.

4. File a consumer proposal through a licensed trustee in your area.  In most consumer proposals you are able to repay less than the full amount owing, so in your case it may be possible to pay, say, $500 per month for three to five years to eliminate your debt.  Certain rules apply, but if your debts are joint with your husband, this may be a good option.

5. The final option is personal bankruptcy.  Bankruptcy eliminates your debt, but the payment you are required to make each month is based on your income.  The higher your income, the more you pay, so this may or may not be the correct option.  For more information, contact a licensed trustee in your area. 

There are options, so we strongly suggest that you investigate your options, and decide on the solution that’s right for you.