Could Debt Consolidation be the kind of Debt Help you are looking for?
If you are in need of debt help and are looking for answers to your financial problems, you have most likely heard of debt consolidation. With all of the debt help options available, how can you know that debt consolidation is right for you? Today I will explain what debt consolidation is, how it may or may not be beneficial for you and how to know if it is the right option for you.
Before we go further, let’s discuss what debt consolidation is and how it can work for you to help pay off your debt.
Debt consolidation is when you take two or more of your existing consumer debts, group them together into one loan, and then make one new monthly payment. You can do this by going to your bank and taking out a loan and using it to pay off all of your existing smaller debts.
Normally a bank will offer a lower interest rate on a consolidation loan than what you are currently paying on credit cards or pay day loans. With a lower interest rate you are able to put more of your monthly payment towards the principle rather than just paying interest each month. This can also mean that you could pay the full amount of what you owe sooner than you would have if you had kept the high interest payments.
In order to qualify for a consolidation loan, you will need to have good credit. You will also need to have a long enough credit history to prove to the bank that you will make good on your end of the bargain. A bank will also look at your income to ensure that you will be able to afford the new payment. If you were previously making minimum or interest only payments, then your new consolidation loan payment may be much higher than what you are paying now. If your income is low, then this may not be an option that will be in your favor. Another thing to consider is how much debt you have in comparison to your income. If you have too much debt, a bank may not approve you to take on more debt. Normally banks will only allow you to borrow up to 40% of your annual income for a consolidation loan. So if you have a lot of debt, this may not be the option for you.
So how can you know if debt consolidation is right for you?
If you have 2 or more consumer debts that you would like to group together into one payment, have good credit and enough income to make your payment, then a consolidation loan may be right for you. If you have a lot of debt in comparison to your income, have issues with your credit or have a low income then debt consolidation may not be an option for you.
If you won’t be able to qualify for a consolidation loan, but are in need of debt help, give 4 Pillars Winnipeg a call at (204) 201-2100. 4 Pillars specializes in assisting individuals and families who are in financial crises. We can help you reduce your debt by as much as 80% and 97% of families who come to us successfully complete the plans we create and become debt free.
