Loans Canada Launches Free Credit Score Portal And Is Recognized As One Of Canada’s Top Growing Companies
Loans Canada is pleased to announce it placed No. 131 on the 2022 Report on Business ranking of Canada’s Top Growing Companies.
The number one reality of using loan and credit products? You need to be responsible with them, making your regular payments in full and on time always. Unfortunately, this is a notion that a lot of borrowers don’t consider properly before they sign on the dotted line. Those borrowers, drawn in by the prospect of getting the credit products they need, don’t always understand the consequences that will befall them if they should default on their payments. Then, somewhere down the line, they end up with a ton of debt that they’re struggling to manage, and must seek other alternatives for repayment. This is where the idea of consolidating their debts becomes a viable option. They must work out a strategy for grouping their debts together and paying them off as quickly as possible to avoid being stuck in debt for years to come.
Now, before you go swearing off all credit products, as we’ve mentioned in previous articles, not all debt is bad. In fact, a healthy amount of manageable debt is good for the overall health of your credit. The more instances of timely paid bills you have, the higher your credit score will be. The higher your credit score, the better your chances of getting approved for new credit. Then again, having too much unpaid debt on your plate can be detrimental to your credit. When the debt becomes more than you can handle and your credit is being damaged in the process, it might be time to think about consolidation as a way to fix your finances. Below, we’ve listed some of the main debt consolidation options that borrowers turn to in their hour of need and illustrate just how those options can benefit you if you’re currently struggling with debt.
Consolidating refers to merging, combining, or unifying a number of objects or beings into a singular entity. Consolidating has a similar meaning when it comes to paying your debts. Much of the time, it’s not each individual debt that borrowers have trouble taking care of, it’s the sheer amount they have. Having so many different debts (credit cards, lines of credits, personal loans, etc.) spread across multiple lenders and companies can make a regular payment schedule difficult to maintain. When borrowers become so busy tackling all of their debt, high-interest credit card debt, in particular, the overwhelming nature of that struggle can cause them to not only neglect their remaining bills but other aspects of their financial lives.
For ways to consolidate your credit card debt, read this.
So, those borrowers, desperate to alleviate their debt load, will often need to find a way of gathering their debts together (or “consolidate” them), in order to pay them off quicker. Below, we’ve listed 6 of the most common forms of consolidation available to Canadian consumers. However, be warned that each consolidation option does come with its upsides and downsides. For this reason, it’s important to make your decision based on your unique needs.
The first option that many borrowers will turn to is the “debt consolidation loan.” Appealing because of its simplicity, with a debt consolidation loan, the borrower will attempt to pay off multiple debts using a single loan. Debt consolidation loans are most often acquired through primary lenders, such as banks, credit unions, and other traditional financial institutions. Like any type of loan, potential borrowers must go through an approval process, wherein their financial health will be examined. Some typical points of examination will be their credit score, assets, and gross monthly income. Once approved, any debts that qualify (certain loans, like mortgages, usually do not qualify for a consolidation loan), such as credit card debt, car loan payments, etc. can be paid off at once. The borrower then simply has to keep up with one monthly payment to their primary lender until they’re debt-free.
As we mentioned, debt consolidation loans, while being a relatively simple solution to your debt problems, are not easy to acquire. So, if you’ve decided that a consolidation loan is right for you, but your credit score, assets (if any), and income alone are insufficient, you can also try getting a friend or family member to co-sign your loan. If your cosigner does have healthy credit and a high net worth, your chances of getting approval should increase.
Will a debt consolidation loan look bad on my credit report? Find out here.
Also known as refinancing your home or taking out a second mortgage, another route that borrowers can choose is to use their home equity to secure a loan. Similar to a consolidation loan, qualified borrowers will be granted a loan by a lender in order to pay off their other debts. However, in this case, the loan will be taken out against their home equity, the money that they’ve already paid towards their mortgage. Their house will then be used as collateral in the event of a borrower defaulting on their payments.
Click here for more information about how to borrow using your home equity.
A line of credit works in a similar fashion to a credit card, except that you’re borrowing money directly from your bank, rather than the credit card company, and using a debit card instead of a credit card. You can then borrow money up to a certain amount (to be negotiated with your lender), which you can then use to pay your debts. From that point on, you’ll only need to pay off your line of credit in affordable monthly payments.
Click here to learn how to use a line of credit.
This leads us to our next option, using a balance transfer credit card to consolidate your debts. When multiple debts, spread over multiple credit cards become too much to handle, another solution that many borrowers choose is to transfer those multiple debts to one “balance transfer” credit card. These cards can be appealing because they often come with very low interest rates, sometimes 0%, for new customers during a limited promotional period. So, with a balance transfer credit card, you can transfer all your debts to a single card, then simply have one hefty credit card bill to deal with, which you can then pay off in increments.
Want to know more ways to consolidate your credit card debt? Read this.
Similar to a debt consolidation loan, entering a Debt Management Program means that instead of having multiple debts with multiple payment dates, you would just be making one monthly payment until all your debt is paid off. However, rather than making that payment through your bank, you would be working alongside a licensed credit counsellor, who will contact your creditors for you to negotiate a payment plan. Debt management plans are common amongst borrowers who are struggling to pay off their credit card debt.
Want to know how long information stays on your credit report? Click here.
Consumer proposals are legally binding proceedings, regulated by the federal government. When filing for a consumer proposal, it usually means that the borrower has a very large amount of debt that they have no chance of paying back entirely. In fact, if you are a borrower and a consumer proposal is your only option, shy of declaring bankruptcy that is, it most likely means that you do not qualify for any of the subsequent forms of consolidation. In this case, you’ll need to hire a licensed insolvency trustee, who will negotiate with your creditors for you to either pay back a portion of what you owe (usually at least 50%) or extend the timeframe within which you have to pay your full debt. Once the proposal is accepted, all actions brought down on you by creditors and collection agencies will cease. You’ll then only have to make a regular monthly payment through the trustee until your debt is partially repaid. Similar to a debt management program, if enough of those creditors agree to the proposal, you should debt-free within 5 years.
Click here to find out how long it takes for a consumer proposal to be accepted or rejected.
Like any important financial decision that you’re making, choosing the right debt consolidation option should take some solid planning. Since each choice certainly comes with advantages and disadvantages, it’s best not to skimp out when you’re doing your research. If you can’t decide which form of consolidation suits you best, try talking to a professional. Seek the help of a financial advisor or credit counsellor for any additional information you may need on your path to becoming debt-free. The sooner your creditors are repaid, the sooner you’ll be able to get your finances back on track for the future.
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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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