Having some form of debt is totally normal and often a necessary part of life in Fredericton. After all, it can be extremely difficult to pay for some of life’s biggest expenses with cash. Big-ticket items like houses and cars are impossible for the average Fredericton consumer to pay for outright, which is why debt in the form of loans is typically required.
But while some debt is fine, too much debt can prove to be unmanageable. Many Fredericton consumers find themselves struggling with the debt that they’ve accumulated over time. While some are able to climb out of their debt on their own, many others find it nearly impossible to do so without some sort of professional help.
That’s when debt consolidation can prove to be very useful and helpful. Let’s go into greater detail about what debt consolidation is and whether or not it may be a solution to end your financial woes.
Check out this article for more ways to conquer your high-interest consumer debt this year.
What is Debt Consolidation in Fredericton?
If you have many different loans on the books, you may find it difficult to manage all your payments. You may also find that some of your loans come with high-interest rates that make it extremely difficult to pay down.
In these cases, debt consolidation may help. With this type of financial product, you can pay off all of your eligible loans with one larger loan, typically at a lower interest rate compared to some of your high-interest debt. Not only can debt consolidation in Fredericton help you save money thanks to a lower rate, but it can also help you better manage just one solitary loan as opposed to several.
Why Do Fredericton Consumers Get Into Debt?
It’s rather easy to find yourself in debt in Fredericton. As already mentioned, buying a car or a house will typically require a loan. Furthermore, you may have taken out a student loan to pay for post-secondary education or a business loan to get your business off the ground and growing.
But while many Fredericton consumers are able to manage their debt, many others struggle with it. More specifically, consumers often take out far too many loans or credit accounts despite their inability to cover all payments on time and in full every billing cycle.
What ends up happening is a large debt pile accumulates and continues to grow, particularly if some of that debt comes with sky-high interest rates, like credit card debt.
Here are just some of the reasons why Fredericton consumers may find themselves in extreme debt:
- Out-of-control spending
- Maxing out credit cards
- Missing loan payments
- Paying bills too late
- Making minimum payments
- Losing a job
- Getting a pay cut
- Suffering a medical emergency
- Dealing with last-minute car repairs
The list can easily continue. The problem is that many Fredericton consumers fail to effectively manage their debt and even continue to add on to it, allowing their debt to get so bad that they end up needing outside help.
Take a look at these great debt management tips.
Does ‘Good Debt’ Really Exist?
Good debt actually exists and is something that can help Fredericton consumers build good credit. By having some sort of debt on the books and being responsible for their payments, Fredericton consumers can establish a strong credit score and keep it up there. With a high credit score, consumers are able to take advantage of all sorts of loans at excellent terms.
Without any debt or credit, there’s no way for consumers to build a credit profile. As long as the debt is used for something useful or something that appreciates in value – such as a mortgage for a home – and loan payments are made on time and in full, this can be classified as good debt.
Bad debt, on the other hand, is debt that is taken out frivolously to pay for things that are either not required or lose value almost immediately. It’s also debt that comes with extremely high-interest rates, such as credit cards or payday loans. Many Fredericton consumers take out loan after loan, stretching their finances extremely thin and making it difficult to keep up with all payments.
It should also be noted that good debt can turn into bad debt if too much accumulates, making it difficult to manage. When it comes to taking out credit or loans, it’s important to be certain that your financial profile is strong enough to handle whatever debts you add on to your accounts.
For more examples of good and bad debt, check this out.
Debt Consolidation Loan Vs. Debt Consolidation Program
A debt consolidation program involves working with a financial professional in Fredericton who can educate you on how to manage debt more effectively and reduce your overall debt load. A debt consolidation loan – which is often part of a debt consolidation program – is the actual loan taken out to replace all other loans you may have. It typically has a lower interest rate than some of the rates your current loans have, making it more affordable.
Should You Apply For Debt Consolidation Fredericton?
While debt consolidation in Fredericton can help many consumers get out of debt, it may not necessarily be the right thing for many others. Here are some valid reasons to consider debt consolidation:
- Make debt management easier with only one debt bill
- Save money with lower-interest debt
- Get guidance on budgeting more effectively
- Get out of debt
- Improve credit scores
What Kind of Debt Can Be Consolidated in Fredericton?
Not all debt can be consolidated. More specifically, secured (or collateralized) debt is usually not compatible with debt consolidation. Further, debt loads that are far too excessive are usually not eligible to be taken care of through debt consolidation.
Here are some types of debt that can be consolidated:
- Credit card debt
- Unpaid cell phone and utility bills
- Unsecured personal loan debt
- Non-government student loan debt
- Medical bill debt
- Car repossession debt
Check out this infographic to learn about how credit scores are calculated.
Can Debt Consolidation Negatively Affect Your Credit Score?
It’s important to have a good credit score, as mentioned earlier. But can debt consolidation in Fredericton negatively affect your score?
The way in which you use your debt consolidation will impact whether or not your credit score will be negatively affected. If you use a debt consolidation loan to pay off high-interest credit card bills, for instance, you can lower your overall credit utilization ratio, which can help boost your credit score. On the other hand, if the loan is taken out and you don’t make timely payments on it, your credit score will fall.
Wondering if a debt consolidation loan will look bad on your credit report? Find out here.
Get Help With Your Mounting Debt
Taking advantage of a debt consolidation program in Fredericton can help you effectively reduce your overall debt load and make managing your debt much easier. If you think that debt consolidation is the right thing for you after carefully considering your finances, call Loans Canada to help you choose the best debt consolidation product and program to suit your needs.
