A recent study conducted by Equifax has shown that Nova Scotia ranks 6th in terms of average debt levels across Canada’s 10 provinces. That said, no borrower’s debt level is exactly the same, particularly in Halifax, where there are so many residents experiencing different financial situations.
If you’re a Halifax resident struggling to deal with your unsecured debt all on your own, a debt consolidation, which involves paying off multiple outstanding accounts at once, might be exactly what you need. Curious to know how this solution can affect your finances in Halifax? Find out below.
Is All Debt Harmful to Your Finances?
With the abundance of credit products in Halifax, many borrowers in Halifax end up charging too, which can result in a serious amount of consumer debt. However, there are plenty of other reasons that a Halifax borrower like yourself could land in debt, including but not limited to:
- Lack of debt management knowledge
- Reduced income or total employment loss
- Injuries or medical issues that prevent someone from working
- House related expenses
- Vehicle-related expenses
- Funerals or other unexpected events
The thing is, not all debt is actually bad for your financial health. That is, until it becomes unmanageable. In fact, when managed properly, a small amount of debt can actually benefit you. For example:
Beneficial Debt in Halifax
Let’s use one of the most common debts as an example; your car. When you’re approved for a car loan in Halifax, you’ll be making an otherwise unaffordable item easier to purchase or lease because you can pay it off via installments. In addition, you’ll have access to reliable and convenient transportation.
Harmful Debt in Halifax
Then again, if you were to take that same vehicle financing and apply it to a car that’s out of your price range, the opposite effect can occur. Remember, most cars not only depreciate in value over time but are also accompanied by a bundle of recurring costs. Every you drop of gas you pump, every part that needs to be fixed or replaced is going to cost you money. Then you add on your payments, interest rate, insurance, registration, and the list goes on.
Is your car loan costing you more than your car is worth? Here’s what to do.
If you overstep your bounds and try to finance a car you can’t afford, you could end up with too much vehicle debt. Afterward, every payment you default brings your credit health down. Your car might even be repossessed if this behaviour goes on for too long.
Check out this infographic to learn more about your vehicle financing options.
Are There Debts That Won’t Qualify For Consolidation in Halifax?
Unfortunately, not all debt in Halifax is eligible for coverage under this debt relief option. Don’t worry, we’ll discuss them so that you’ll have an easier time deciding if debt consolidation is the right choice for you.
Typically, only debts that aren’t collateralized by assets, such as your house or other valuable property (better known as “unsecured” debts) will qualify. This includes but isn’t restricted to:
- Credit cards
- Personal lines of credit
- Unsecured installment-based loans (
- Vehicle repossession penalties
- Overdue non-credit bills
- Hospital bills and other medically related debts
For further information about these eligible debts, click here.
On the other hand, debts that have been collateralized, otherwise known as “secured” debts will not qualify, such as:
- Mortgages
- Vehicle loans
- Student loans granted by the Federal Government
- Secured installment-based loans
- Home equity loans and home equity lines of credit (HELOC)
- Bills related to court judgments (child support, alimony, lawsuits, etc.)
Is There Only One Type of Debt Consolidation in Halifax?
Actually, there are two debt consolidation methods to choose from and both of them involve paying off multiple debts in one go. The ultimate goal is to leave you with a single monthly payment, which is generally easier to manage than numerous due dates, interest rates, and fees. Each method can have a significant effect on your finances, so be sure to discuss them with a financial advisor in Halifax before you attempt either.
Debt Consolidation Loan
Available through most lenders in Halifax, debt consolidation loans are a better option for anyone who’s looking for an efficient way of streamlining their finances. It can also reduce the amount of interest, late penalties, and fees involved, effectively saving you money.
However, a debt consolidation loan may not the best choice if you don’t have good financial strength. After all, it is a credit product that you need to be approved for, the same as any other. In fact, if your existing credit products caused prior harm to your finances, you may not qualify because it would pose a significant risk for your lender in Halifax.
Generally speaking, to qualify for a debt consolidation loan in Halifax, you need elements such as:
- A credit score of 680-900 (good to excellent credit)
- Valuable assets to offer as loan security
- A cosigner to take over your payments if you can’t afford them
- A decent income and net worth
- A reliable, full-time source of employment
- The proven ability to make loan payments in full and on schedule
Here’s what to do if your application for a debt consolidation loan gets rejected.
Debt Consolidation Program
When taking on another loan is not possible or advisable, the other option would be a debt consolidation program. This can a better choice for borrowers in Halifax who have bad credit, aren’t making a sufficient income, or prefer the idea of a professional guiding them through the process. With this program, a certified credit counsellor will be needed to oversee the process.
Want to know more about credit and debt counselling in Canada? Read this.
Instead of applying for a new loan or having to deal with the responsibility of it afterward, you would be entering into a program wherein your counsellor in Halifax will contact your debt sources on your behalf. In doing so, they can negotiate a deal that also allows you to pay off your unsecured debts through a series of monthly payments, similar to a consolidation loan. Rather than paying your debt sources directly, however, your payments will go toward your counsellor, who will send them to any parties involved.
Look here to see more benefits of a debt consolidation program.
Once again, there are a few important things to consider before you apply for one of these programs in Halifax, including but not limited to:
- Credit counselling may not be free. While some counsellors and agencies are nonprofit, others may charge you a flat fee, rather than a typical interest rate, once your debts are consolidated.
- Credit counsellors are not miracle workers. You must make the effort and follow your program responsibly. As it would be with a loan, defaulting on your payments will only lead to worse financial results.
- Watch out for scam artists and predatory agencies in Halifax as they may use your desperation to steal your money or identity. Always research your credit counselling source before you give them any personal or financial information.
Wondering if you’re a victim of identity theft? Find out here.
Will Consolidation Impact My Credit Health?
Yes, debt consolidation can have a negative and positive impact on your credit health. In fact, both debt consolidation loans and programs are going to show up on your credit report for a number of years after you’ve completed them, during which it will be difficult to receive approval and reasonable interest rates whenever you apply for new credit. Potential lenders in Halifax and Canadian in general, may look at your report, see a record of your consolidation and consider you less creditworthy. Every payment you make causes your credit score to fluctuate. Full and on-schedule payments make it rise. Late or missed payments make it fall.
What about a debt consolidation program?
The same effect can be seen with a debt consolidation program, which can be even easier to deal with than a loan in some respects. However, during the program, your credit rating will lower to an R7, meaning you’re currently making payments toward some kind of debt settlement arrangement. Once again, potential lenders in Halifax might see a lower rating as a sign that you’re not responsible with credit. Nonetheless, when your current lenders report that your debt has been settled to Canada’s credit bureaus, your credit will improve gradually.
All this said, only choose debt consolidation if you’re comfortable with the temporary credit damage that follows. Since it wouldn’t be healthy to take on more debt and your accounts may have been frozen anyways, you may have to live without credit until the damage is repaired. Be sure you’re making a reasonable income and have some savings before you try either solution.
Take a look at this infographic to learn more about credit scores.
Interested in Consolidating Your Debt?
If you’re interested in either of these debt consolidation solutions in Halifax, rest assured that Loans Canada is on your side. We can put you in touch with the right debt consolidation professionals in Halifax for your financial situation. Contact us today!
