According to the Canadian Payroll Associations, 37 per cent of Canadians feel pressured under their debt. The fact that household debt in Canada reached $2.08 trillion in 2017 is noteworthy. The good news is that insolvency in Canada has gradually tumbled down over the last decade, meaning less Canadians are going for bankruptcies and consumer proposals. With average household debt inclining, it is ironic that there’s been lower insolvencies. However, debt consolidation might be the thing to consider, as more Canadians with multiple unsecured debts are selecting this kind of financing for to alleviate debt.
What is Debt Consolidation?
Almost every one of us has some type of debt, varying in degree. In the circumstance where a person has multiple unsecured debts (like credit cards or student loans), a debt consolidation loan can be a good solution for paying back creditors. Debt consolidation is offered by financial establishments and debt consolidation companies and it combines multiple consumer debts into one loan. Merging consumer debt can help those who have debt exceeding $10,000 or more, are receiving notices from collection institutions or have accounts with high interest rate, as debt consolidation loans typically have lower interest rates and monthly payments.
It should be kept in mind that transferring your unsecured debts onto one loan won’t vanish your debt. However, a debt consolidation loan can help a person save money from high interest rates and monthly payments. Debt consolidation loans have lower fees which allows a person to pay off all their debts quickly, while boosting one’s credit.
A person must have the credit and income necessary to get approved for a low interest rate debt consolidation loan. Financial institutions or debt consolidation services will glance at the applicant’s credit history, and will usually request a letter of employment, credit card statements and letters from creditors or repayment agencies. Once approved for a debt consolidation loan, it’s important to discern what unsecured debt needs to be paid off first. A good strategy is to pay off the largest amount of debt having the highest interest rate.
What are Demerits of Debt Consolidation?
Pooling your existing debts into one loan has its financial benefits. However, the payments should be made on time to the debt consolidation loan, otherwise it could increase your risk factor and put you in jeopardy. Although interest rates on a debt consolidation loans might be lower compared to individual unsecured debts, payments on a consolidation loan will likely span over a longer period of time – this allows lenders to give lower rates and more manageable monthly payments. It might be convenient to obtain a secured debt consolidation loan however this could be a major risk factor for those who can’t commit to monthly payments. Before applying for a debt consolidation loan, you should do your research. Maintaining a relationship with creditors and requesting them for information on your current debt situation will help you understand the factors of a consolidation loan in-depth.
Debt consolidation loans should only be utilized by people who are overwhelmed with their debt and need help managing finances. If you’re thinking of a loan to help rebuild credit, consider car financing and give Canada Auto Experts a call at 1-855-550-5565 right now!