With such easy access to credit products like credit cards, payday loans, online lenders and more, it is easy to see how one might find themselves paying 7 or more bills per month. These can set you on a seemingly endless cycle where you pay minimum payments just to get your payment in on time, but with the mounting interest, you never really make a dent on the balance. Debt consolidation Ontario allows you to get started on your way to being debt free.
But I Have Good Credit…
You don’t have to be suffering from a poor credit score in order to benefit from debt consolidation. People of all walks of life can use the services of a debt consolidation loan or program to reduce their monthly payments. In fact, if you have good credit, you will have the luxury of shopping around for the best loan rate from the various lenders offering consolidation loans.
My Credit is Less Than Perfect
Even if you are experiencing a troubled credit score, debt consolidation could still be a possibility. It is best to seek out a professional financial advisor or debt consolidation service to go over your specific situation and debt load. You may need to explore other options rather than debt consolidation, however, it is still worthwhile to investigate. You may need to look at what assets you have to offer as collateral in order to secure financing. The options are outlined below to help you decide what might work for you.
First off, you should list out all of your current monthly debt payments. This list should include the balances owing, interest rates for each debt and the minimum monthly payment. It’s easiest to use a program like Excel to create this list since there are many formulas you can use to track the amounts. Even listing dates the payments are due will help keep things organized.
Options for Debt Consolidation
There are more options available than a straight up loan to merge all of your debts. If your credit is bruised in anyway, you may have to look at a secured loan. This means a loan which is granted based on the creditor securing some of your assets. The creditor is protected from you defaulting on the loan by the assets you offer to put up.
Another option is a line of credit, where you are given a specified amount and as you pay it back, the credit becomes available to you again. It can be tempting to keep using these funds, so not always the best option if you are looking to clear your debt.
If you are a homeowner and have some equity built into your home, you could consider applying for a second mortgage on your house. A loan such as this may get you more capital than a traditional loan, which is great for larger debt loads. The other added bonus of a second mortgage is the interest rate is usually lower than average loans.
You should weigh out the pros and cons of each type of consolidation to see which one would suit your situation. This is where having a professional on your side would be helpful since they know the ins and outs of debt relief and how to become debt free.
Do I Have to Include Everything?
By having a look over your list of monthly debts and their corresponding interest rates, you will be able to determine which ones have very high rates. You can then compare the interest rates you are paying versus the interest rate you are able to get on your debt consolidation loan. If you are paying a significantly lower rate for one or two of your debts, it may be in your best interest to pay these separately. However, you should be aware then that you will still have more than one monthly payment.
If you do not have superior credit, it may be a requirement of your creditor that you pay off all of your outstanding debts, regardless of interest rate, in order to qualify for the consolidation loan. The best person to speak to about these situations is a trustee, financial advisor or bankruptcy officer.
Other Options Available
If you have difficulty in obtaining approval for a consolidation loan or any kind of financing through banks or online lenders, don’t panic. There are other options to help you get out of the dark spiral of debt you may feel you are in. Debt Settlement Plan’s are an option which will reduce your interest, potentially remove any penalties you have incurred and allow you to pay down the principal faster. These Plans are overseen by professionals who you pay on a monthly basis and they, in turn, pay your debtors on your behalf.
Consumer Proposals are another viable option before bankruptcy and could help you reduce even your outstanding balances. You would be responsible for only a percentage of what you actually owe. This would require the intervention of a Trustee on your behalf, since it is a formal process.
As a final resort, you could file for bankruptcy and look to start fresh, although with severely damaged credit. Usually a bankruptcy remains on your credit report for 7 to 10 years after full discharge. A Trustee in Bankruptcy can walk you through the required information, documentation and then assess your specific situation.
No matter the course of action you opt to take, debt shouldn’t be a burden on your back causing sleepless nights and anxiety. You can start off small by just getting organized. As they say, “baby steps”. Speaking to a professional in the industry will only serve to help you and you should never feel embarrassed by the debt you have accumulated or are having difficulty repaying. Admitting you need help is a big step and the first one on your freedom from owing large amounts to creditors and paying exponential amounts of interest.