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📅 Last Updated: March 8, 2024
✏️ Written By Lisa Rennie
🕵️ Fact-Checked by Caitlin Wood

Debt is a rampant problem for consumers across New Brunswick, especially debt that comes with high-interest rates. The more debt you have on your plate, the harder it can be to pay it all down. And the more debt you add to your books, the longer it will take you to become debt-free.

While having some debt is not necessarily a bad thing, it can completely take over your financial life. And the more loans you have that each require their own separate payment, the more difficult it can be to manage all of your debt. This is where debt consolidation can help.

What is Debt Consolidation in New Brunswick?

Basically, debt consolidation involves consolidating all of your debt into one, single payment. Rather than having multiple loan payments to make, each with their own interest rate, you’d only have to manage one loan payment every month. The biggest bonus is that the payment will probably come with a much lower interest rate compared to some of your other high-interest debt, such as credit card debt.

Debt Consolidation Loans. These loans are ideal for those who have been keeping up with their payments and have good credit. They can help consumers reduce their overall interest in order to help them save money over the long run.

Anyone in New Brunswick who has many loans on their plate at high-interest rates could benefit from a debt consolidation loan. Although the interest rate might be somewhat higher than a secured loan, it is often less than what is typically charged on credit card balances. As such, debt consolidation loans can effectively reduce your interest rate and your overall payment amount.

Don’t understand secured and unsecured debt? Look here for an explanation.

If you have been diligent about keeping up with your payments and have good credit, this type of program may work for you. It can provide you with a way to streamline your finances while saving money on interest.

Read this if your debt consolidation loan application gets denied.

Debt Consolidation Programs. If you’ve been turned down for a debt consolidation loan because of your bad credit, there are debt consolidation programs available in New Brunswick to help. These programs are designed to help consumers in New Brunswick with their debt by reducing monthly debt payments, roll all payments into one single payment, waive penalties and fees, and avoid any black marks on credit reports.

Learn How to Tackle DebtWant to learn how to tackle your debt for good? Click here.

What if You’re a New Brunswick Consumer with Bad Credit?

If you are a New Brunswick consumer with bad credit, you may still have some options when it comes to debt consolidation.

Get a cosigner. Even if you’ve been turned down for a debt consolidation loan, you might be able to get accepted if you have a cosigner with good credit. A cosigner can be anyone with good credit who agrees to take over your loan payments if you default in the future. This means that the cosigner will be responsible to make payments until the loan is fully repaid.

Wondering what types of lenders accept co-signers? Find out here.

Use the equity in your home. If you have equity built up in your home, you may be able to use it to secure a debt consolidation loan. Although you will still be in debt, you’ll still be able to transfer your high-interest debt to another loan with a lower interest rate to help you save on interest charges.

Should you pay your credit card debt using your home equity? Read this to make your decision easier.

How Do New Brunswick Consumers Get into Debt?

Debt is rather easy to get into. There are plenty of expenses in life that can be very difficult to cover without taking out a loan to pay for the charges. However, things can spiral out of control if you’re not careful. Here are just some of the reasons why consumers get themselves into deep debt:

  • Overspending
  • Irresponsible spending habits
  • Loss of a job
  • Pay cut
  • Medical issues
  • Financial emergencies
  • Unexpected car or home repairs

Although many times it is the consumer who may put themselves in a financial predicament, life can also throw us unexpected curveballs that are out of our control and can put us further into debt.

What Types of Debt Can Be Consolidated in New Brunswick?

Generally speaking, only unsecured debt can be consolidated in New Brunswick, including the following:

  • Credit cards
  • Unsecured personal loans
  • Gas cards
  • Non-government student loan debt
  • Cell phone debt
  • Utility bills
  • Medical bills

Secured debt, such as mortgages, is usually not eligible for consolidation.

Bad Debt Vs. Good Debt

Is there such a thing as “good” debt? Isn’t all debt bad?

Not necessarily. There is certainly a difference between good and bad debt.

For example, good debt is considered to be anything that allows you to leverage other people’s money to advance your financial situation. Buying a home in New Brunswick, for example, is generally thought of to be good debt because it involves purchasing an asset that is expected to appreciate in value over time. As long as you don’t overextend yourself with your mortgage amount, a home loan can be considered good debt that can help you build wealth over time.

Can’t figure out how long you should amortize your mortgage for? Try reading this.

On the other hand, bad debt is considered anything that doesn’t afford you with something that appreciates in value. In fact, bad debt is money that’s taken out to buy something that actually depreciates in value rather quickly.

A car loan can be considered bad debt for this reason. Since cars typically lose value very quickly, the debt incurred is considered bad debt. That said, most people need a car in their lives and are unable to pay for the car in full upfront. As such, a car loan is actually necessary, despite what category it may fall under in terms of good versus bad debt.

Canadian Credit ScoreCheck out this infographic for more information about credit scores.

Will Debt Consolidation in New Brunswick Affect Your Credit Score?

Debt consolidation in New Brunswick may affect your credit depending on how you choose to go about it. For example, if you take out a personal loan to consolidate your debt, your lender will need to pull a “hard” inquiry, which will be reported on your credit report and pull your score down temporarily.

However, if you choose to consolidate your debt to pay down high-interest debt like credit cards, you can effectively reduce your credit utilization ratio, which can actually help your credit score.

Need a bad credit loan in New Brunswick? Look for it here.

Frequently Asked Questions

Can debt consolidation lower my credit score?

In the beginning, a credit check may be required which will lower your credit score a bit. But, in the long run, your score should improve, especially if you have bad credit. According to TransUnion, if your score is under 600, there is an 84% chance of improving your score by 20+ points if you consolidate your 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.

When should I consolidate my debts?

There’s a window of opportunity for consolidating your credit. When less than half your income is going towards loan repayments, and you have a fair credit rating of just under 600, then it may be a good idea to consolidate. You’ll need to be prepared to budget and stay out of further debt. Racking up more debt while you are consolidating existing loans is a recipe for disaster.

Make Your Debt Easier to Manage

Debt consolidation can be a great way to make your debt a lot easier to manage in New Brunswick. It can also make your debt much more affordable by reducing the overall interest burden. Find out more about debt consolidation and how it can help your finances by getting in touch with Loans Canada today.

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