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Like many other cities and provinces in Canada, Manitoba citizens carry a lot of debt from month to month. While their debt levels (at least in terms of consumer debt) are among the lowest in the country, they do in fact have one of the highest levels of delinquencies, which means lots of Manitoba consumers are struggling to pay off their debt on time. Instead of continuing to struggle to make many small debt payments each month, there is another option, called debt consolidation.

Searching for some debt solutions? Check out credit counselling in Manitoba.

What is Debt Consolidation?

When discussing debt consolidation, there are two different options for consumers in Manitoba. Depending on your debt levels and overall financial health, one may be a better option for you than the other.

Debt Consolidation Loan

When an individual in Manitoba takes out a large loan, with the sole purpose of using this loan to pay off all of the other small debts that they might have, that loan is called a debt consolidation loan. Not only will this make keeping up with payments easier (as you will only have one now), debt consolidation loans can often grant you a better interest rate, too. However, you must remember that this doesn’t eliminate your debt, it just shifts it around, so you still need to put in the work to pay it off.

If your application for a debt consolidation loan gets denied, read this.

Debt Consolidation Program

These work by an individual enrolling in a plan or program that helps to consolidate their loans. In this option, instead of taking out a loan to cover your debts, your debt relief provider in Manitoba will consolidate your debts into one monthly payment. While enrolment can negatively affect your credit, it will keep you from having to take out another loan.

Learn How to Tackle DebtCheck out this infographic to learn how to create a plan to tackle your debt.

Reasons People Get Into Debt in Manitoba

So just how do people in Manitoba find themselves in the type of debt that would require the assistance of a debt consolidation loan or program? Well, there are many different reasons and most of them have to do with bad financial habits and behaviours. These include:

Poor Money Management

Simply put, many people in Manitoba just manage their money poorly and find themselves in debt.

Whether it’s from taking on too many loans, gambling, spending too much, eating out too much, or anything in between, racking up debt is often far too easy for many consumers in Manitoba.

Wondering how to manage your money successfully? Find out here.

“Keeping up with the Joneses”

Living within your means is incredibly important, unfortunately, a person’s pride can often get in the way of that. Buying things you can’t afford simply because everyone else is or because you want to look a certain way is one of the easiest things you can do to create debt problems for yourself.

Look here for some helpful debt management tips.

Lack of Discipline

Having self-control when it comes to spending is incredibly important. While we would all love to buy a new pair of shoes, a new car, or the new video game whenever we want, we have to be disciplined. We will eventually be held accountable for the spending we have done, so don’t let a credit card convince you to spend on something you wouldn’t spend cash on.

In addition to the financial habits and behaviours mentioned above, there are also some unfortunate and unforeseen things that can take place to lead people in Manitoba to fall into debt, such as:

  • Job loss or sudden reduction in income
  • Financial emergencies such as a car crash or home repairs
  • Medical or health-related emergencies.

Bad Debt vs. Good Debt

While people might often think that debt is always a bad thing, that actually isn’t the case. There is both good debt and bad debt.

Good Debt

Basically, if the debt is helping you in some way, providing a service or increasing your potential, it can be seen as good debt. This includes things like a mortgage, a student loan, or an investment in your company.

Interested in a business loan in Manitoba? Check this out.

Bad Debt

Bad debt is considered anything that doesn’t help you grow any sort of asset or help further you in your career or life. These types of debt generally include things like credit card debt and even car loan debt. While a car loan gets you a car, which is good, a car is a depreciating asset.

Of course, these are just generalizations, as there is always a grey area when it comes to debt. For example, while a mortgage provides a necessary service to many, they aren’t always “good loans” especially if people spend too much on them and become house poor. So whether a debt is good or bad will largely depend on your own unique situation.

Frequently Asked Questions

Can debt consolidation improve my credit score?

You may see your score drop initially. However, a debt consolidation loan will improve your credit score in the long run. Even more so if you have poor credit. According to TransUnion, 84% of borrowers with scores under 600 saw their scores increase by 20+ points after consolidating their debts.

Is a debt consolidation loan different from a regular loan?

Debt consolidation loans are very similar to any loan. You are consolidating simply when you take a low-interest loan to cover multiple higher-interest debts. That said, while credit counseling and consumer proposals are considered forms of debt consolidation, they are not loans. Those options will renegotiate the terms of your debt at the cost of hurting your credit rating.

What types of debt can I consolidate?

Some debts are better suited for consolidation than others. Unsecured high-interest debts like credit cards and personal loans work best. However, student loans or overdue taxes shouldn’t be consolidated as better payment arrangements can be negotiated directly. You typically do not include secured loans in debt consolidation either. This includes car loans, mortgages, and home equity lines of credit. Those can actually be renegotiated into consolidation roles which you can roll your unsecured debts into.

The Right Debt Consolidation For You

If reading this article has helped you decide that debt consolidation is the right move for you, don’t hesitate to reach out to Loans Canada, as we can help match you with the right service provider in Manitoba.

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