📅 Last Updated: October 1, 2021
✏️ Written By Kale Havervold
🕵️ Fact-Checked by Caitlin Wood

If you feel that you are overwhelmed with your debts, you are certainly not alone. Many people British Columbia and Canada, in general, take on too much debt and are stuck with payments that they are unable to keep up with. You might try and battle these debts and their payments on your own but that is easier said than done.

Take a look at this timetable to see how ongoing debt could affect you.

However, you are not doomed to continue doing it all alone. Thankfully, there are options in British Columbia for those who find themselves in mountains of debt and need some assistance. One of the most popular and common options in British Columbia is debt consolidation.

What is Debt Consolidation?

Debt Consolidation is essentially when someone gets a new and larger loan, to pay off all of their smaller existing loans. By doing this, they are combining all of their debts into one, which makes handling debts much easier. For example, many people have several payments to make every month, and it can be easy to become confused or miss some of them.

Here’s what happens when you can’t make your loan payments on time.

In addition to making your monthly payment a lot easier, debt consolidation can also help you get a lower interest rate, which could save you a ton of money in the long run. This can help you pay off debt faster and get back on track to healthier finances and a better credit score.

What is a Debt Consolidation Program?

Debt consolidation programs are also a good option in British Columbia, where you’ll be working closely with a credit counsellor to ensure that you are able to enjoy a debt-free future! These programs will help you to combine all of your debts into one, simple payment and help reduce your monthly debts.

Want some information about credit counselling in British Columbia? Look here.

The main difference between a debt consolidation loans and a debt consolidation program is that a debt consolidation loan requires you to take out a loan to pay off all of your debts, but with a debt consolidation program, your debt relief provider will help you combine all of your debts into one payment. This prevents you from needing to take out a loan, and also, many prefer to work with a debt relief specialist instead of handling this alone.

Learn How to Tackle DebtCheck out this infographic for even more information about how to tackle your debt.

Reasons Why People Get into Debt in British Columbia

Debt consolidation is a debt relief option that can work for a wide variety of people, with a variety of different types of debt in British Columbia. So, just what sort of things lead people to get so much debt that they need to consider debt consolidation?

Well, there are many different reasons that people get into debt in British Columbia and they include:

  • Overspending and not tracking where all of their money is going each month
  • Losing a job and having to use their remaining savings to handle bills
  • A demotion or other reduction in their income
  • Emergencies such as a car accident, home repairs, and medical issues can often force people into debt
  • Buying a home that they simply cannot afford, which can be a problem in expensive places like Vancouver and Victoria, in particular

For a better idea of the cost of buying a house in Canada, look at this infographic.

Keep in mind that not all debt can be consolidated with a debt consolidation program and often a debt consolidation loan requires an average to good credit score. So, depending on what type of debt you have and how you accumulated it, one of the two debt consolidation options available to you may be a better choice for your needs.

To read more about consolidation and how it can help you, check this out.

Bad Debt vs. Good Debt

When we think of debt, we always seem to assume that debt is bad. However, this isn’t really the case. While some debt is definitely bad, other sorts of debt can actually be good and helpful in certain scenarios. In an effort to differentiate the two, we’ll take a closer look to ensure you know which debts are considered good and which are bad.

Click here to see some debt consolidation options for those with bad credit.

Bad Debt

Bad debt is bad because it pays for things that don’t provide any sort of financial return, and will actually make your finances worse over time. Also, once you bring interest into the fray, this debt becomes even worse. Examples of bad debt include consumer debt and credit card debt, payday loan debt and even car loan debt as vehicles are depreciating assets.

Trying to find debt relief from your payday loans? Read this first.

Good Debt

On the other hand, good debt is debt that you take on that will essentially act as an investment in yourself or your future. These include things like student loans, investment for your business, or a mortgage.

Of course, if you can go through life without any sort of debt that would save you the most amounts of money, but that simply isn’t realistic at all for most people. Also, these rules aren’t black and white, as a mortgage isn’t always a good debt, especially if you are house poor.

Frequently Asked Questions

How does debt consolidation affect my credit score?

Initially, there might be a slight decrease in credit score since a credit check is required. In the long-term, your score will improve. This is especially true for those with low credit scores. According to TransUnion, 84% of subprime borrowers see an improvement of 20+ points after consolidating their debts.

How is a debt consolidation loan different from a regular loan?

Debt consolidation loans are no different from regular loans. The main idea is to use a larger low-interest loan to pay off many smaller high-interest debts. Credit counseling and consumer proposals are forms of consolidation, but they are not loans. Instead, they renegotiate the interest or amount of debt you owe.

How can I qualify for a debt consolidation loan?

Each lender will have different criteria for their debt consolidation loans. That said, you will not qualify for debt consolidation loans if you are enrolled in credit counseling, a consumer proposal, or bankruptcy. You will also need a steady income with a reasonable debt-to-income ratio. If you are unable to qualify, you should consider consolidation options that do not involve a new loan, such as credit counseling or a consumer proposal.

Debt Consolidation Options in British Columbia That Work For You

If you feel that debt consolidation is the debt relief option you want to go with, feel free to reach out to Loans Canada and we are confident that we can help.

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