📅 Last Updated: November 4, 2021
✏️ Written By Kale Havervold
🕵️ Fact-Checked by Caitlin Wood

Unless you’ve been able to save a significant amount of money, there is a good chance that you will need to take out a loan at least once in your life. This is fine, there is nothing wrong with borrowing the money you need, just as long as you can afford the cost of the loan. Unfortunately, it is possible to take things a little too far. If you take it too far (by taking out loan after loan), you can run into a lot of financial trouble.

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The more debt you have, the harder it can be to keep track of everything and you could end up forgetting about certain payments or losing track or what has been paid for vs. what hasn’t been. Thankfully, there is a solution that can make your monthly payments much more manageable, debt consolidation.

Types of Debt Consolidation in Newfoundland and Labrador

There are two different types of debt consolidation available in Newfoundland and Labrador that can help you simplify your monthly payments.

Debt Consolidation Loans

A debt consolidation loan in Newfoundland and Labrador involves you taking out a larger loan, using it to pay off all of your smaller debts and thus simplifying your monthly payments. So instead of making multiple payments each month, you will only have to remember to pay one.

Debt Consolidation Program

The other type of debt consolidation in Newfoundland and Labrador is a debt consolidation program often referred to as a debt management program. This type of consolidation helps simplify your monthly payment the same as a loan, but without having to take out another, larger loan. You will work with a debt relief counsellor who will come up with a repayment plan and schedule that works for both you and creditors. Then you will make payments to your counsellor who will administer that money to your creditors.

The type of debt consolidation you choose will depend on your unique situation in Newfoundland and Labrador, but both can be good options. Also, there is a good chance your monthly payments (and potentially your interest rate) will be lower thanks to debt consolidation.

Bad Debt vs. Good Debt

People from all ranges of life in Newfoundland and Labrador can find themselves in debt troubles, for a variety of different reasons. However, not every type of debt is a reason to worry or stress. In fact, many people in Newfoundland and Labrador believe that there are both good and bad debts. Let’s take a closer look at both different types to help you understand a little more about them.

Good Debt

Good debt is generally seen as something that is an investment in the future, one that will either grow in value or one that will help you move forward as a person. Types of good debt include mortgages, student loans (in most cases, but not all), or investments in your business.

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Bad Debt

Bad debt is any loan that was taken out to pay for something that will quickly decrease in value or do not help in generating any income or furthering you as a person. This includes things like credit card debt, auto loans, and predatory payday loans.

Of course, this isn’t always black and white as some debt that is generally good can also be seen as bad. For example, while a mortgage is normally good debt, if you get a mortgage that you can’t afford and end up being house poor, the debt is clearly bad for you.

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Can All Debt be Consolidated in Newfoundland and Labrador?

Now debt consolidation sounds great, and it can be, but it is important to understand that depending on the type of debt consolidation you choose, loan or program, not all types of debt can be consolidated. If you choose a debt consolidation loan, you can consolidate just about any type of unsecured debt. But, if you choose a debt management program, there are some limitations.

Types of Debt That Can Be Consolidated With a Debt Management Program

  • Credit card debt of all kinds
  • Unsecured personal loan debt
  • Auto-repo debt
  • Non-government student loan debt
  • Past-due phone and utility bills
  • Medical debt

Types of Debt That Cannot Be Consolidated With a Debt Management Program

  • Mortgage
  • Home loans
  • Auto loans
  • Government loans of all kind
  • RV and boat loans
  • Back taxes

Of course, if you are interested in discussing the exact specifics of your financial situation you should speak with an expert in Newfoundland and Labrador to make sure that the types of debt you have can indeed be consolidated.

The True Cost of BorrowingCheck out this infographic to learn all about the true cost of borrowing.

Frequently Asked Questions

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.

Should I get a debt consolidation loan?

If you’re having trouble paying down multiple loans at high rates, it may be time to consider consolidating them while you have the opportunity. The best time to do so is while your credit score hovers around 600 and less than half your income is going towards loan payments. It’s important that you’re ready to start budgeting as well. You shouldn’t be taking on new loans until your consolidated debts have been paid out completely.

Are there debts that cannot be consolidated with a debt management program?

Secured debt like mortgages and car loans, as well as payday loans, cannot be included in a debt management program. Furthermore, back taxes and any other type of government debt typically do not qualify for consolidation via a program.

Helping You Find the Right Debt Consolidation Solution

If you’ve decided that debt consolidation could be the solution you’ve been looking for, Loans Canada can help find you the best service provider in Newfoundland and Labrador.

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