It would be lovely if people could avoid debt and could always afford what they wanted, but that is hardly ever the case. Many of us need to borrow for a wide range of situations including emergencies, homes, cars, education, and other large purchases or costs.
Unfortunately, while some can afford to pay off this debt, others struggle and find themselves unable to keep up with the monthly cost of carrying too much debt. Currently, Ottawa, as well as the rest of Ontario are struggling with growing levels of household debt, which could prevent some consumers from getting out of debt at all.
For some, their situation might even call for the use of a debt relief solution. One of the most popular is debt consolidation.
Do you know what the true cost of borrowing is? Find out here.
What is Debt Consolidation?
Debt consolidation is a common debt relief solution that involves an individual taking out one large loan to pay off their smaller loans and thus consolidating all of their debts into one. This can make payments much easier to handle, and you can often get a better interest rate. It can potentially even lower your total amount of debt, but this will depend on a number of factors.
Loan vs. Program
There are actually two different kinds of debt consolidation. There is a debt consolidation loan, which we mentioned above, and a debt consolidation program. A debt consolidation program involves meeting with a credit counsellor, creating a repayment plan, and then paying them a lump sum every month which they will distribute to the correct creditor. In a sense, it also brings all of your debts together, similar to a debt consolidation loan, in that you only need to make one payment and they can take care of the rest.
As for which option is better, that will depend. The debt consolidation program will stop you from having to go out and get a second loan, but there might be some fees and counselling involved. Also, the type of situation you’re in could help you decide. While they can help people who are struggling, debt consolidation loans can also be good for someone with good credit who is making payments, but simply wants to save on interest. On the other hand, a debt consolidation program is often best for someone with bad credit, someone who had been rejected for a loan or simply needs some help.
Bad credit debt consolidation in Ottawa can be a great way for a wide range of consumers to tackle their debt. Either way, before making a choice you need to be sure to speak with an expert to discuss which option they recommend for your unique needs.
Video: Debt Consolidation Explained
Reasons People Get into Debt in Ottawa
So just how do people find themselves in enough debt to need assistance in the form of debt consolidation? Well, one of the biggest reasons simply comes down to irresponsible financial habits. This could be missing payments or overspending. While credit cards are incredibly helpful, they also make it very easy for people to develop bad financial habits.
Of course, overspending and other avoidable and irresponsible behaviour are not the only reasons why consumers deal with debt. In fact, a large percentage of consumers in Ottawa who are in debt because of a wide variety of unexpected issues, including:
- Job loss
- An unforeseen reduction in income
- Medical issues
- Emergency travel
- Car crashes
- Home repairs
So while some people think debt only happens when someone is financially irresponsible, that isn’t the case at all. There are many potential reasons why people could find themselves in debt and require a debt relief solution.
The 5 top reasons why people get rejected for a debt consolidation loan, click here.
What Debt Can and Cannot Be Consolidated
However, while debt consolidation can help out a ton of different people, not all types of debt can be consolidated. Only certain types of debt can be consolidated through a loan or program. This includes unsecured debt like credit cards, non-government student loans, personal loans, medical bills, and past-due utilities.
Types of debt that cannot be consolidated include government student loans, car loans, and mortgages. If you have these types of debt, you need to pay them in full as normal or risk losing your home or car. So before you decide to go with debt consolidation, be sure that the type of debt you hold can indeed be consolidated. If it cannot, a different debt relief solution is likely a better option for you.
Will a debt consolidation loan look bad on your credit report? Find out here.
Is Debt Consolidation Right For You?
Have you decided that debt consolidation is the right option for you? Loans Canada can help match you with the right options based on your unique needs, whether that’s a debt consolidation loan or program.