Is Debt Consolidation the right debt help tool for you?
Most often a handyman will wear a tool belt that carries the main tools that he will need to repair fences, tighten screws, a measuring tape and pencil to check and double check measurements and a hammer with nails to make sure items are fastened properly. Just like the handyman has several tools to fix a problem, there are several “tools” available to fix a financial problem. If you are experiencing financial trouble and are in need of debt help, which tool is best for your problem? Could it be debt consolidation? Keep reading to find out.
What debt consolidation is and how does it work in Canada?
Debt consolidation, in simple terms, is taking out one larger loan to pay out several smaller loans. Why would we do this? When a person has a lot of high interest debt such as credit cards or pay day loans and only makes minimum payments or maybe slightly more, it can be difficult to pay the debt completely off. When most of your payment goes directly to the interest then it will take a long time to see the principle balance go down. Consolidation loans most often have lower interest rates than credit cards and pay day loans therefore more of your money will go toward the principal. A consolidation loan will also have fixed payments, which means that you will be required to make the same payment each month of your loans term. In order to consolidate your debts you will have to qualify for the consolidation loan. To make sure that you qualify your bank will need proof of your income. They will also need to take a look at your credit score. If your credit score is too low you may not qualify or you could qualify with a higher interest rate. If the interest rate is not low enough though, it may not be beneficial for you to use a consolidation loan to help you with your debt.
How do you know if a consolidation loan is right for you?
If you have 2 or more debts, such as credit cards, pay day loans, a car loan etc., have good credit and are able to make the monthly payments then a consolidation could be the right option for you. If you are not able meet the criteria for a consolidation loan there are other options available. At 4 Pillars Medicine Hat we work for our clients not their creditors, so we always have our client’s best interest in mind. If you would like to learn more about consolidation loans or other ways of clearing up your debt, give us a call at 403-332-7361.
