Debt Consolidation Manitoba

Ways To Consolidate Debt In Manitoba

If you’re looking to consolidate your debt in Manitoba, there are a few ways you can do so:

1. Debt Consolidation Loans

A debt consolidation loan is a type of loan that allows you to combine several debts into a single loan, ideally with a lower interest rate.

In this scenario, you would use the funds from a new loan to pay off your existing debts, like credit card balances and other unsecured debts. If the new loan has a lower interest rate than your current debts, you can save money on interest payments. Plus, replacing multiple bill payments with just one loan payment can make it easier to manage your finances.

Learn more: Debt Consolidation Loans

You can take out different types of loans to consolidate your debt:

Personal Loans

A personal loan is a type of loan that can be used for various purposes, including consolidating debt. Personal loans are often unsecured, which means no collateral is required.

Personal loans can either have fixed or variable interest rates, and typically have a set repayment term, ranging from a few months to a few years. Over the term, you make regular installment payments until the loan is paid off.

When Is A Personal Loan Best For Debt Consolidation? 

A personal loan may be suitable for the purposes of debt consolidation if the following apply:

• You Can Secure A Lower Rate: If you have high-interest debt, consolidating it with a personal loan at a lower rate can help you save money on interest and streamline your payments.
• You Want A Fixed Repayment Term: If you want to set a goal of paying off your debt by a specific date, a personal loan’s fixed repayment term can offer that certainty.
• You Want Fixed Monthly Payments: If you prefer the predictability of fixed payments every month, a personal loan can provide more stability, and therefore make it easier to budget.

Learn more about personal loans.

HELOC

A home equity line of credit (HELOC) is a type of loan that allows you to access your home equity. Your lender will provide you with a credit limit based on the amount of home equity you have. Generally speaking, you can borrow up to 80% of your home’s value, less any outstanding mortgage balance.

A HELOC works like a credit card, in that you’ll have access to a revolving line of credit that you can withdraw from as required. HELOCs typically have variable interest rates, which means the rate can change over the term based on market conditions.

When Is A HELOC Best For Debt Consolidation?

A HELOC may be good for debt consolidation purposes in the following cases:

• You Have Significant Home Equity: If you have a lot of equity in your home (at least 20%), you may qualify for a HELOC to borrow against that equity to repay high-interest debts.
• You Want Flexible Repayment Terms: A HELOC’s revolving credit can be ideal for you if you want flexibility in accessing various amounts of money over time instead of one lump sum.
• You Want An Extended Repayment Period: HELOCs often come with longer repayment terms, which can provide you with access to funds over a longer period of time. This can be advantageous if you need more time to deal with your debts.

How Much Can Debt Consolidation Save You?

Debt consolidation can save you quite a bit of money, depending on how much debt you’re carrying, your current interest rates, and the length of your loan term. 

Let’s illustrate how much you could potentially save by consolidating your debt using an example. Here, we’ll compare how much you’d pay by keeping your credit card and personal loan debt (with a 5-year term) to what you’d pay if you consolidated this debt: 

In this example, you would reduce your monthly payments by nearly $85, and you’d save more than $5,000 in interest over the 5 years. 

2. Balance Transfers

A credit card balance transfer involves moving the balance of one card to a balance transfer card, typically to benefit from a very low or zero interest rate for a specific amount of time. The new credit card provider will pay off the balance on your old credit card, and the balance will be added to your new credit card’s balance.

Note: Balance transfer fees may apply, which can range from 3% to 5% of the transferred amount. 

When Is A Balance Transfer Best For Debt Consolidation?

You may consider a balance transfer to consolidate your debt if the following apply:

• You Can Qualify For The Promotional Rate: If you qualify for a balance transfer credit card with a 0% introductory interest rate, you’ll have a certain amount of time to pay off the balance without accruing interest.
• You Have Good Credit: Balance transfer credit cards generally require good credit to qualify for the lowest rate.
• Savings Outweigh Fees: If the balance transfer fee is lower than the rate you pay on your existing debt, this may be a cost-effective option.

3. Debt Management Program

A debt management program (DMP) is a process facilitated by a credit counsellor who will review your financial situation and options. They will negotiate with your creditors on your behalf to come up with an alternative arrangement for you to pay your debts with one consolidated monthly payment. Then, you’ll have up to 5 years to complete your payments.

What Types Of Debts Can Be Included In A DMP?

Generally speaking, DMPs can include unsecured debts, like credit cards and unsecured personal loans. They typically don’t handle secured debts, such as mortgages or auto loans.

When Is A DMP Best For Debt Consolidation?

You may consider a DMP for debt consolidation purposes if the following apply:

• You Can’t Keep Up With Your Payments: If you’re struggling to keep up with your mounting debt, consolidating it into a more affordable and manageable payment through a DMP can help.
• You Need Some Structure: A DMP provides a structured repayment plan, which can be helpful if you need some encouragement and guidance to be disciplined with your bill payments.
• You Want To Avoid Bankruptcy: If you’ve tried other options to deal with your debt with no success, you may be at risk of bankruptcy. If that’s the case, a DMP may help you manage your debt without resorting to such a dire option.

Learn more about Debt Consolidation In Canada.

Where Can You Find A Debt Management Program?

Various credit counselling agencies are available in Canada that can help you come up with a structured and customized DMP, including the following:

Alternatives Debt Relief Solutions In Manitoba

Aside from the options listed above, other solutions may be available in Manitoba to help you deal with your debt:

• Debt Settlement: This debt relief option involves settling your debt by paying a reduced amount as full payment. You’ll provide a payment to your debt settlement firm, who will then pay your creditors on your behalf to settle the debts.
• Consumer Proposal: This legal process allows you to settle your unsecured debts as an alternative to bankruptcy. You work with a Licensed Insolvency Trustee (LIT) who will come up with a proposal to your creditors to pay them a portion of what you owe. Once your consumer proposal is filed, it will provide you with legal protection from collection calls, wage garnishment, or lawsuits.
• Bankruptcy: This option is a legal process that provides relief for individuals who are unable to repay their debts. Like a consumer proposal, bankruptcy requires that you work with a LIT. You may have to surrender certain assets to your LIT (though some may be exempt), who will use them to repay your creditors. Once you file for bankruptcy, you’ll be protected from legal actions by creditors.

Additional Reading

Payday Loan Debt Relief: Stop The Payday Loan Debt Cycle

Can You Consolidate Tax Debt in Canada?

Debt Management Products For Credit Users

Debt Consolidation FAQs