Dealing with debt is something that millions of Canadians do every year. Whether you live in a major city like Vancouver or a smaller town like Moose Jaw. Life can get expensive. Between credit card payments, mortgage and rent payments, car loans, and student loans, most of us have a lot of bills to worry about.
While some can handle their monthly payments with ease, others aren’t quite so lucky. Managing a lot of debt can add a lot of stress and worry to our lives, which no one enjoys. Thankfully, there are debt relief solutions to help people with their debt and one of the most popular in Moose Jaw is debt consolidation. This solution can help people manage their debt and hopefully even get a lower interest rate.
The Two Types of Debt Consolidation
Debt consolidation in Moose Jaw is essentially when someone takes out a large loan to cover all of their smaller unsecured debts. This will greatly simplify your payments as you will only be paying off one debt every month, instead of multiple. In some cases, such as if you have high-interest credit card debt, the debt consolidation loan will often save you a lot of interest as well.
However, in order to truly understand debt consolidation, you need to know both types; debt consolidation loan and a debt consolidation program. Here is an in-depth look at both options.
Debt Consolidation Loan
A debt consolidation loan is when a borrower will go to a lender and take out a larger loan to cover all of their smaller debts. This loan can be secured or unsecured, and the right option depends on what you can put up as collateral and how comfortable you are with the added risk of a secured loan. People will often get these to either simplify their payments, stop having to pay the high interest associated with other loans, or to get more favourable terms.
However, it is important to know that not everyone will automatically be approved for a debt consolidation loan. Your approval will depend on how you have been handling your debt, your credit and your overall financial situation. If you have been consistent with your payments, have decent credit and simply want to save money on interest, a debt consolidation loan will likely work for you.
Debt Consolidation Program
It is also important to understand what a debt consolidation program is. It works similarly, but your debt is paid off in a different way. Instead of going out to get a whole new loan, you essentially pay a credit counsellor a lump sum every month, and they will distribute the correct amount of funds to the correct creditor. They can also sometimes get you lower rates and negotiate on any penalties.
Your credit counsellor will also help you with budgeting and provide you with many tools and knowledge that will help you out with your finances going forward. Some of the main reasons people will enter these programs are if they are unable to get a debt consolidation loan, or if they also want some other financial assistance or instruction in addition to simply consolidating their debt. This is generally the option for those who need bad credit debt consolidation in Moose Jaw, and those who can’t pay down their debt on their own anymore and require the help of a professional.
Reasons Why People Get in Debt in Moose Jaw
Of course, the main reason for requiring debt consolidation in Moose Jaw is finding yourself with a lot of debt. But just what are the reasons that people end up getting in debt in Moose Jaw? Well, there are many potential reasons. First of all, many people find themselves in debt by overspending and abusing credit. If you are irresponsible with your spending, paying off your bills can sometimes prove difficult.
On the other hand, it is important to remember that not everyone who finds themselves with debt got there because they were irresponsible or have horrible financial habits. There are plenty of other unfortunate life events that can lead to people getting in debt. This includes:
- Loss of job or income reduction
- A medical emergency
- Car accident or crucial home repairs
- Emergency travel to care for a loved one
All of these situations are unfortunately fairly common and leave people struggling financially, needing to take on debt to get by.
Bad Debt vs. Good Debt
It is important to be aware that not all debt is bad debt, despite what many might think, just because someone needs debt consolidation in Moose Jaw doesn’t mean they got there by being irresponsible. In fact, there are several types of debt that are actually considered good debt. In general, good debt refers to debt that will improve the value of an asset or is seen as an investment. This can include things like student loans and mortgages. The mortgage gets you a home that often appreciates in terms of value, and getting a good education makes you more employable and more likely to get a high-paying job.
Of course, there are also some that are considered bad debt. In general, these are types of debt that either go into a depreciating asset or offer you no value. This is your typical credit card debt, as well as things like car loans, and payday loans.
While it is generally quite simple to learn what types of debt are good and bad, this isn’t always the case. For example, while a mortgage usually qualifies as good debt, if you purchase a home that is far out of your budget and are house poor as a result, the mortgage wasn’t a good choice. If you are unsure about whether a certain type of debt is good or bad, and whether it’s a good idea in your unique financial situation, be sure to speak to some experts in the field in your area.
Can All Debt Be Consolidated in Moose Jaw?
While debt consolidation in Moose Jaw can be a great solution, it is important to ask yourself whether the type of debt you have can be consolidated or not. Unfortunately, not all debts are able to be consolidated. In order to help you learn what debt can and cannot be consolidated, we have included a small guide.
Debts That Can Be Included in a Debt Consolidation
- Credit card debt
- Auto repossession debt
- Student loan debt (as long as it’s non-government)
- Medical debt
- Utility bills
- Back rent
- Personal lines of credit
Debts That Cannot Be Included in a Debt Consolidation
- Mortgages
- Car loans
- Government student loans
- Auto loans
- RV and boat loans
- HELOCs
- Lawsuits
- Alimony and child support
If your debt isn’t listed, or you are still confused about whether your debt can be included, ask a credit counsellor or other trusted expert in your area. They should be able to guide you along the right path and make sure you make the best decision for your needs.
Is Debt Consolidation Right for You?
If you’re currently struggling with excessive consumer debt and aren’t sure how to tackle it, debt consolidation could be the right option for you. Loans Canada can help you compare lenders and find the one that best suits your debt consolidation needs.
