While there are many expensive places you can live in Canada, few are more expensive than Vancouver. Living in these places often requires consumers to take out multiple types of loans to pay for a variety of expenses like vehicles, emergencies, travel, repairs, etc.
While many people can handle multiple types of debt and payments each month, others find it very difficult to handle this type of financial stress. If you find yourself under a mountain of debt month to month, and can’t handle it anymore, you may want to consider debt consolidation as a debt relief option.
Check out this infographic to learn about the true cost of borrowing.
The Two Types of Debt Consolidation
If you decide that debt consolidation is something you want to consider, you’ll have a second decision to make. There are actually two different types of debt consolidation, a debt consolidation loan and a debt consolidation program. We’ll take a look at each of them to help you decide which might be right for you.
Debt Consolidation Loan
A debt consolidation loan is a loan that people apply for in order to make their monthly debt payments simpler and easier to handle. If you have to make several different debt payments to different lenders each month, it can be a lot to handle. A debt consolidation loan is essentially getting one large loan to pay off your smaller debts and then making one large payment each month, instead of several smaller ones.
In addition to making your monthly payments much simpler, a debt consolidation loan is also a great way to secure better terms and a lower interest rate, which could save you a lot of money in the long run.
Wondering how lenders arrive at their interest rates? Find out here.
Debt Consolidation Program
If you feel as though a debt consolidation loan isn’t right for you or you’re unable to get approved for one, you can always opt for a debt consolidation program. In a debt consolidation program, you don’t borrow any additional money, like in the debt consolidation loan. Instead, you will pay your debt relief provider one large payment each month, and they will distribute it to the appropriate creditors.
This program often results in your monthly debt responsibilities being lower than they were before. It’s also important to keep in mind that enrolling in this program could potentially hurt your credit and make it hard to secure new credit during the program and for a while after.
Read this to discover some of the benefits of a debt consolidation program.
As you can see, each has their benefits and drawbacks, so be sure to speak to an expert to help you decide which might be a better option for you before choosing one or the other. Regardless of which you end up using, the main goal of each is to help you make your monthly debt responsibilities a lot easier to handle and deal with.
Bad Debt vs. Good Debt in Vancouver
While most of us will have some sort of debt at some point in our lives, there is a difference between good debt and bad debt. Being unsure of the difference between good and bad debt can be harmful to your finances. In an effort to help consumers better understand the type of debt they have, here is the difference between good and bad debt.
Good debt is any kind of debt that helps you grow a type of asset, whether physical or theoretical. This asset could be anything from a home to a business or even your education. As a result, examples of good debt are things like mortgages, student loans, business loans, and investments.
Interested in asset-based leasing and financing? Check this out.
Bad debt, on the other hand, is debt that doesn’t help you grow an asset or increase your potential. Examples of this debt are things like consumer credit card debt and often the debt that comes with a car loan. They are sometimes necessary but aren’t helping us move forward at all.
Of course, these categories aren’t set in stone, and there are some examples where a type of debt that is usually good debt is actually bad debt. A solid example of this is when someone gets a mortgage that is simply too expensive and they become house poor.
What Debt Can Be Consolidated and What Cannot?
While debt consolidation is a great solution for some, it isn’t always the best for others. This is because not all types of debt can actually be consolidated. If you are going to opt for a debt consolidation, you need to be aware of what can be consolidated and what cannot. Here is a list of a few of the debts that can be consolidated and a few that cannot.
Debt That Can Be Consolidated
- Credit card debt
- Student loans (as long as they are not federal)
- Unsecured personal loans
- Medical and hospital bills
- Income taxes
- Utility bills
- Back rent
Debt That Cannot Be Consolidated
- Home loan
- Auto loans
- Secured loans
- RV or boat loans
- Government loans
Of course, if there is ever any confusion about whether a certain debt can be consolidated or not, be sure to speak with your debt relief expert or a credit counsellor.
Want to learn about credit counselling in Vancouver? Take a look at this.
The Right Debt Consolidation For You
Whether you want to enroll in a debt consolidation program in Vancouver or take out a debt consolidation loan, here at Loans Canada we are confident that we can help you achieve your goals.