There are ways to consolidate your debts into one, lower, monthly payment and pay off your debts sooner. Debt consolidation in Canada can mean many things and it’s important to understand the differences. All of the following debt relief options allow you to consolidate your debts into one single monthly payment:
- obtaining a debt consolidation loan through a lender;
- consolidating your debts through a Debt Management Plan;
- settling your debts through a consumer proposal;
Each of these alternatives help you get out of debt but each has different benefits and work better in certain situations.
The logical place to start is with a debt consolidation loan through your financial instituion. You probably already deal with a bank: you deposit your paycheque at a bank, and you pay your bills through your bank account, so your bank is already familiar with you, your income, and your spending. Since they already know you, they are more likely to give you a debt consolidation loan.
Your next option, if you own a house, is to try a different type of debt consolidation lender, called a mortgage broker. A loan secured by a house is the cheapest form of borrowing possible; so, if you qualify, this is a great option.
If you don’t qualify for a mortgage, you could try a finance company. However, finance companies charge very high interest rates, generally at least three times more than what a bank would charge, so only borrow from a finance company if you have no other option.
There are also debt consolidation or credit counselling agencies in Canada that offer to help you consolidate your debts into one, easy payment. In effect, what they are offering is similar to a debt management program or debt settlement. These debt consolidation companies will not give you a new loan, rather they will help you negotiate a plan with your creditors. But they do come with risk.
Make sure you understand what services the debt consolidation company will be offering you. Will you be paying fees up front? What debts will be included in your debt consolidation plan?
If you are having trouble paying your debts, you have several options and you should consider them all. Talking to a professional debt advisor, like a trustee in bankruptcy, can help you determine which alternative is best for you.
If you need to reduce you debt and would like to consolidate your debt into one, lower, monthly payment contact an advisor today to discuss your options.