More and more people have financial problems: too much debt, inability to make monthly payments, too much debt, and so on. Many of these people are wondering what debt consolidation is and whether debt consolidation is a good idea in their case.
What is a “debt consolidation”?
First, debt consolidation is a loan from a bank or financial institution that is used to pay off your debts in one payment. After consolidating your debts, you will have only one monthly payment to make. Not all debts can be included in debt consolidation. For example, mortgage loan can not be included in the consolidation. Generally, we consolidate our debts of credit cards, line of credit and personal loans.
Why consolidate your debts?
If you have difficulty making monthly payments or find that you are paying too much interest, debt consolidation will allow you to:
- Reduce your monthly payments
- Decrease your interest rate
- Correct the delays in your obligations
Who is debt consolidation aimed at?
In general, everyone can consolidate their debts, regardless of the amount. On the other hand, it is definitely people who have too much high-interest rate debt (credit cards, etc.) that will benefit greatly.
To obtain a consolidation loan, however, you must have a good credit record and stable income. A bank will only grant you a consolidation loan if it is confident that you will be able to repay it.
My bank refuses to consolidate my debts, what can I do?
If your bank refuses you a consolidation loan, it’s probably because you do not have a good credit record or your income is insufficient. If so, there are still solutions to reduce the burden of your debts. One option to consider is the consumer proposal.
What is a consumer proposal?
The consumer proposal is a solution to the debt that is often confused with debt consolidation. In a consumer proposal, you offer a partial repayment of your debts over an extended period. For example, you could offer to repay 50% of your debts over a period of 5 years (60 months). In the case of such a proposal, you would make a single monthly payment, without interest, and which would be distributed among your creditors.
In short, the consumer proposal allows you to settle your debts while respecting your ability to pay and keeping your assets (house, car, etc.).
For more information on these options, contact us at no charge and no obligation.