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Living with debt isn’t easy and neither is paying it off. In fact, it can take years just to break even, due to the interest and fees you’re charged over time. When that happens, it can be tempting to seek drastic alternatives, like debt consolidation programs. But, before committing to any debt relief help, it’s important to know if the program and provider you chose is right for you.
When it comes to debt consolidation, there are two types you should be aware of. A debt consolidation loan and a debt consolidation program (often referred to as a debt management plan).
A debt consolidation loan can be found at most financial institutions. There are plenty of legitimate businesses in Canada, including most banks and credit unions, that offer debt consolidation loans to qualified borrowers. However, these types of loans are more difficult to get approved for and the borrower requires average or good credit.
On the other hand, if you want to enter a debt consolidation program, you’ll normally have to do it through a credit counselling agency. This program is great for those with poor credit as there is no credit score requirement. However, these debt consolidation programs are an informal proposal between you and your creditor, which is negotiated by your credit counsellor on your behalf. This means, unlike a consumer proposal or bankruptcy, it is not federally regulated and your creditor can choose to opt out of the program at any point in time.
A debt consolidation program (or debt management plan) is where a credit counsellor contacts your creditors to broker a deal that allows you to repay your debt in monthly installments over a predetermined period.
The goal is to leave you with a lower monthly payment and single installment plan, which should make the process more affordable than having numerous debts and interest rates to keep track of.
Find out the difference between budgeting and debt consolidation.
While debt consolidation programs can be great under the right circumstances, there are always pros and cons to be aware of when it comes to choosing the right debt relief option for your needs.
Find out what kind of debt can be consolidated with a DMP.
Working with a debt settlement company? Here are questions you should ask your debt settlement company.
While there are legitimate debt consolidation programs available in Canada, there are always risks involved, even with recognized companies. So, be sure to research your debt consolidation source and find out about any costs before you give out your personal or financial information to anyone.
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Loans Canada is pleased to announce it placed No. 131 on the 2022 Report on Business ranking of Canada’s Top Growing Companies.
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