Which Debt Management Option Is Right For You?

Debt, most of us have it and many of us need to learn how to manage it better. If your debt is out of control and you’ve finally promised yourself that this is the year you’ll get your finances back on track, then we have you covered. We’ve put together a comprehensive and easy-to-follow infographic that details the debt management options that are available to you. Simply answer the questions as honestly as possible and we’ll lead you to the option that’s best suited for your current debt situation.

Debt Settlement

Debt settlement is a debt relief option that allows you to settle your debts by paying off a portion in one lump sum payment. Typically you or your debt settlement company will negotiate with your creditors to strike up an agreement. Depending on how your negotiations go, the creditor can choose to agree or reject your offer. If your creditor agrees, you simply make the payment and your debts will be settled. For example: if you have a debt of $10,000, your creditor may be willing to settle your debt if you pay them an upfront amount of $6,500. However, it’s important to remember that if your creditor rejects your offer, the debt settlement company may still charge you fees for their time and services.

Pros and Cons of a Debt Settlement

Pros

Lowers the amount of debt you owe.
Doesn’t affect your credit as much as a bankruptcy.
You can negotiate a debt settlement by yourself or through a debt settlement company.

Cons

Your creditors may reject your offer.
It negatively impacts your credit.
You may still be charged fees by your debt settlement company if the creditors reject the offer.

This is a great option for those who are completely overwhelmed by their current debt load, cannot afford to pay their full payments and have credit accounts in collections. With the help of our debt settlement specialists, your total amount of debt will be reduced.

Debt Consolidation Loan

A debt consolidation loan involves taking all your unsecured debt and rolling it into one larger loan that has a low-interest rate. The idea is you’ll be better able to track your payments while saving on interest. Moreover, you can create a new payment plan that works better with your current financial situation. You can choose to consolidate your debt through any of the following:

A personal loan.
If you currently have equity in your home, you can work with a mortgage specialist who can help you consolidate your debt using the equity in your home.
A balance transfer credit card

Pros and Cons of a Debt Consolidation Loan

Pros

Consolidates your debt so you only have to worry about one payment.
Saves you interest when you consolidate all your high-interest debts.
Can increase your credit score if you make full on-time payments.

Cons

You need a good credit score to qualify for a debt consolidation loan.
You may need to provide collateral or a cosigner to qualify for the loan.
It can negatively impact your credit score if you miss any payments.

A debt consolidation loan is great for those whose debt load has become too difficult to handle but still have strong credit scores. We can help you obtain a debt consolidation loan that will not only lower your interest rate but also your monthly payments.

Debt Consolidation Program

For those who feel like they need help getting their debt under control, a debt consolidation program is a great option. When you enter our debt consolidation program you’ll work with a debt specialist who will negotiate with your creditors on your behalf. The goal is to halt any interest charges and readjust your payment terms so that you can afford to pay off your debts.

Pros and Cons of a Debt Consolidation Program

Pros

You’ll make a single payment every month to your credit counsellor who will distribute the payments to your creditors.
You’ll be able to pay off your debts within 3 -5 years.
You don’t need to have a good credit score to qualify.

Cons

If your income isn’t enough to cover your debts despite the halt in interest rates and an extended term, you won’t qualify.
A debt consolidation program will negatively affect your credit.
You can only consolidate your unsecured debts.

The debt consolidation program is great for most applicants who need help with paying down their debts but is a particularly great option for those who are having trouble getting approved for a debt consolidation loan. Apply today to discuss how the debt consolidation program can work for you.

Start Today!

If you’re struggling to manage your debt, speak to a credit counsellor to discuss all the debt relief options available to you. They will evaluate your debt and overall finances and offer you a solution that best meets your needs.

Apply Now

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Caitlin Wood

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.