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Debt Debt Consolidation Debt Consolidation Loan Debt ReliefWhen credit users struggle with debt, a debt consolidation loan is often their best option. These types of loans are typically beneficial for all parties involved as the borrower gets the debt relief they need and the lender receives the money they are owed.
However, just because it’s a possibility, doesn’t mean that is without a doubt the best option for you. Further, as with all types of financial products, not everyone can or will qualify for a debt consolidation loan.
Check out this infographic to learn which debt management option is best for you.
Simply put, debt consolidation is when all of your individual eligible debts are combined or consolidated under one large loan, usually with more favorable terms such as a lower interest rate. The main purpose of a debt consolidation loan is to make the management of your debt easier so that you can pay back the money you owe within a reasonable time frame.
Getting approved for a debt consolidation loan is a great opportunity to pay down your debt and regain control of your finances and unfortunately, not everyone who needs one is able to access this opportunity. Below we’ve compiled the top 5 reasons why some consumers are unable to get approved for a debt consolidation loan.
Having a low credit score and negative payment history will prevent you from receiving a consolidation loan. This is why we always stress how important making on your payments on time and checking your credit score and report are.
Simply put, if you don’t have the money to pay back the loan on time, your chances of getting approved for a debt consolidation loan are unfortunately low. Managing the cost of daily life and not to mention any unexpected expenses plus loan payments, means you need to have some form of regular and reliable income, even if you don’t have a typical 9 to 5 job. A debt consolidation loan is typically repaid within 3 to 5 years, which means it’s in your best interest to maintain a healthy income during this period of time.
What is worse? No credit history or a bad credit history? Unfortunately, while neither is the best situation to be in, neither are going to help get you approved for the debt consolidation loan you need. If you’re new to credit in Canada (because you’ve always used a credit card under someone else’s name) or you’ve recently immigrated, not having enough credit history can prevent you from acquiring a consolidating loan. Low credit history implies a lower credit score and also represents a lack of experience with credit. It signifies to lenders you’re not responsible enough or experienced enough with credit to have this sort of loan.
For more information on no credit vs. bad credit, check out this article.
The majority of banks and creditors only let individuals borrow up to 40% of their total yearly income. This means that your current debt payments plus the consolidation loan you’re applying for can’t exceed 40% of your yearly income. If it is over 40%, you may be rejected for the loan.
Learn how to tackle your debt once and for all by checking out this infographic.
Some lenders require or at least ask for collateral when you apply for a debt consolidation loan. This is especially true for those consumers who have had trouble keeping up with their payments for past loans. Collateral is a way for the lender to ensure that they won’t lose the entire cost of the loan should you default.
If you’ve recently been declined for a debt-consolidating loan, don’t give up just yet. Even though you’ve been rejected once, this doesn’t mean you can’t improve your finances and be accepted in the near future. Follow these recommended steps while keeping your goal in mind and remain positive.
To close, it’s important to remember that consolidating debt isn’t an option for everyone, as it strongly depends on your financial situation and lifestyle. Using a debt consolidation loan has its pros and cons, but it’s important to remember that it’s not going to make your financial problems or debt disappear. You have to find the root of the problem and follow the recommended solutions in order to overcome this struggle. With determination and stern spending restrictions, you can overcome any financial issue you have.
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E-Transfer payday loans are designed for ease and convenience and make accesses funds easy. But, keep in mind that they come with high interest rates.
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