Do you have a lot of debt? Are your monthly payments too high? If your debt is getting out of hand and you feel like you can’t control it anymore, enrolling in a debt consolidation program could be the solution you’ve been looking for.
But we also completely agree that the unknown is scary. Having some basic knowledge about the inner workings of a debt consolidation program will allow you to take full advantage of it and hopefully achieve all your goals. This is why we want you to know what to expect when enrolled in a debt consolidation program before you make your final decision.
While researching the types of debt relief options available to you, you likely came across the terms debt consolidation program (not to be confused with a debt consolidation loan) and debt management program. They are basically the same and are often used interchangeably depending on who you are talking to.
A debt management program is a type of debt consolidation, therefore we refer to this service as a debt consolidation program.
How Does a Debt Consolidation Program work?
Unlike more drastic forms of debt relief like a consumer proposal or bankruptcy, a debt consolidation program is not a legal process. Instead of working with a lawyer or a Licensed Insolvency Trustee, you’ll work with a certified credit counsellor who will help you through the entire process. Your main goal when meeting with your credit counsellor is to provide them with as much information about your finances as possible, the more information they have, the better they’ll be able to help you.
Your counsellor will figure out exactly how much debt you have
Your counsellor will create a budget that covers all your debt, expenses, and income
Your counsellor will negotiate with your creditors and come to an agreement on a monthly payment
Your counsellor will provide you with the tools and knowledge to deal with any future financial issues
The purpose of a debt consolidation program is to consolidate your eligible debts into a more manageable monthly payment. The credit counsellor who you work with will negotiate, on your behalf, with your creditors and lenders in hopes of reducing your interest rates and or eliminating any penalties you might incur or have already incurred. This way you can continue to afford all the necessities of your life while working toward your goal of being debt-free. In most cases, debtors are able to get out debt quicker and save money on interest charges while making more manageable monthly payments.
How to Know if You Need Help
When it comes to your debt you are your own expert. If you feel like you need help then you probably do. If you think asking for help is your best option, ask for it.
If you’re losing sleep because of your credit card bills, if you’re having trouble concentrating at work because of a predatory payday lender or if you feel like your life is on hold because your personal debt levels just keep getting bigger, we want you to know that you’re not alone and there is help waiting for you.
Help is available to all Canadians who are currently dealing with debt and we want you to take advantage of that help so you can start living the debt free life you deserve. Give yourself the best possible chance for a brighter financial future by doing some research and finding a debt consolidation program that’s the right fit for you.
What Types of Debt can be Consolidated with a Debt Consolidation Program?
A debt consolidation program is a great option for many consumers who struggle to keep up with the cost of being in debt. With that being said, not all types of debt can be included.
Seeking the help of a professional and deciding to enter a debt consolidation program are decisions we know you won’t take lightly, this is why we think it so important that you know what to expect before you make any final decisions. For your reference and to help you make sure you’re making the right choice, here is a brief list of some debts that can be consolidated.
Credit Card Debt
Credit card debt is unsecured which means it is eligible to be included in a debt consolidation program. In fact, credit card debt is one of the most common reasons why consumers choose this form of debt relief.
Personal loans that are unsecured, meaning when you originally took out the loan you didn’t have to put up any form for collateral like a vehicle, can also be included in a debt consolidation program.
Auto Repossession Debt
If your vehicle has been repossessed because you were unable to keep up with the payments, you may be able to include that debt.
Non-Government Student Loan Debt
If you have private or non-government insured student loan debt that is causing you too much financial stress, entering a debt consolidation program might be a good option for you.
Past-Due Cell Phone/Utility Bills
If you have a past-due cell phone or utility bill and you’re no longer using the same service, it’s possible that you can include that debt in a debt consolidation program.
Medical Bill Debt
Not all medical bills are eligible to be consolidated, but some are. If this is the main reason why you are considering a debt consolidation program, we recommend that you seek the advice of a credit counsellor first.
What Are The Benefits Of A Debt Consolidation Program?
A debt consolidation program is a great option for those who can’t afford to keep up with their monthly payments. It will allow you to work toward paying off your debts and regaining some control over your financial life. Let’s look at some of the benefits of joining a debt consolidation program.
Reduce Your Monthly Debt Payments
Depending on your financial situation and how much debt you have, you could see a reduction of as much as 50%. The great news is that the reduction in interest means that more of your money will be going toward paying off the principal rather than the interest that is accumulating.
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One Easy and Affordable Payment
Another advantage of a debt consolidation program is that you’ll only have to worry about making one monthly payment. You’ll make your payment to the credit counsellor who you’re working with and they will distribute the money accordingly.
Certain Penalties and Fees are Waived
Once you enroll in a debt consolidation program your credit counsellor takes control of your debt and negotiates with your creditors on your behalf. Your counsellor might be able to get certain penalties removed, fees reduced or charges waived. Certain fees may have to be paid no matter what, but it never hurts to have a professional working to help you get the best deal possible.
Debt is Paid off Quicker
Once your credit counsellor has negotiated with your creditors you’ll be given an amount that must be paid on time to your counsellor every single month. This payment will probably be less than you’re used to paying, this does not mean you’re being given more time to pay off your debts. Rather your counsellor works hard to consolidate your debts and get reductions on fees and interest for you, this in return allows more of your money to go toward paying off the principal of your debt instead of the interest that your debt accumulates.
Avoid Black Marks on Your Credit History
One of the best parts of a debt consolidation program is that you’ll be avoiding a more serious financial issue, like bankruptcy. Bankruptcy is often the best choice for certain people but if it can be avoided, it should be. With a debt consolidation program, you’re still paying off your unsecured debts in full which means your credit history won’t have the big black mark of bankruptcy on it.
The Disadvantages of Debt Consolidation Program
As with anything in life, everything has its advantages and disadvantages. A debt consolidation program is no exception. This is why it is important to understand what debt consolidation is and if it is the right choice for your situation. Here we’ll go over the disadvantages so you can make an informed decision.
A debt consolidation program is voluntary and therefore not legally binding which means that your creditors can opt-out at any time.
You won’t have any protection from your creditors and they can still send collection agencies after you.
You will not be able to open any new lines of credit or apply for new credit cards; if you do it could hurt the success of your program. Before you decide to start a debt consolidation program make sure you won’t need any kind of new credit in the near future.
Your debt consolidation program might not take effect for a couple of months. This means that your creditors won’t receive your payments right away. You should continue to make the regular payments on your bills so that you won’t miss a payment.
The sooner you enroll in a debt consolidation program the sooner your new debt-free life can start. Taking that first step and asking for help can be scary but we know that once you start you’ll be so happy you did. Becoming debt-free is a journey, one that will take a lot of hard work and effort from you. If you stick to the program that your credit counsellor creates for you, we know you’ll be able to achieve all your goals. The most important thing for you to do is learn from this experience, listen to your counsellor and work hard to get rid of bad financial habits and create new good ones.
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