When you are swimming in debt, debt consolidation can be a lifeline. All of us have struggled with debt and personal finances at different times so reaching out for help is not the stigma it once was.
Today, there are many different companies offering debt counselling and debt consolidation services. This has helped millions of Canadians restore their credit rating and get back their peace of mind around their financial situation. If you think you have a debt problem, you probably do.
Some experts suggest that if you can’t make the monthly payments on your credit cards, you are in trouble. Others use a formula. If your loans or debts are more than 30 percent of your monthly income, you have a debt problem. Long before creditors start calling, you should do something about it.
1. Visit a debt counselling company
One thing you can do today is to visit a debt counselling agency to find out about your options. These agencies offer a number of programs. The main program that many of them suggest is to consolidate all of your debts into one debt consolidation loan.
The debt counselling companies help you develop a monthly debt repayment plan that you can afford. After that, they will approach your creditors and aske them to take these lower payments. They also request that all additional interest that they might have gotten be waived. You pay them one monthly payment and they pay out the agreed amount to your creditors on a pro-rated basis.
2. Get professional debt consolidation
Debt consolidation is a great arrangement that allows you to combine multiple debts from all sources, like credit cards, lines of credit and personal loans into one regular monthly payment. Creditors like it because they get back most of their money and debtors like it because it can result in a lower interest rate, and simplify the debt repayment process by combining many payments into one.
There is a one-time set up and administrative fee, and all of the rest of the money paid into the debt consolidation process goes to relieving the overall debt.
3. Do research on debt consolidation loans
A debt consolidation loan is a single loan that allows you to repay your debts to several or all of your creditors at once. They are most often negotiated on a client’s behalf by a debt counselling agency. At the end of the process, you are left with only one outstanding loan. It saves your credit and a lot of additional interest payments. This option is attractive to people who have outstanding debts at a relatively high rate of interest like full-service credit cards or stores from retail outlets.
4. Are you qualified for a debt consolidation loan?
In order to qualify for a debt consolidation loan, you will need to have a regular income and be able to demonstrate that you will be able to manage the loan. That is to repay the loan and still continue to pay all of your regular monthly expenses and bills.
Not all debts can be repaid in this fashion. For example, mortgage debts or previous debt consolidation loans are not eligible, but all credit card, utility and phone bills, as well as other consumer loans can be included in a debt consolidation loan.
5. What to do after you got the loan?
Most personal finance experts say that getting out of debt is easy. Staying out of debt trouble is much more complicated. That’s why they make a number of suggestions for things you should do after you get a debt consolidation loan. First, you should get rid of all credit cards, except for one that you hold for emergencies.
Secondly, they suggest you make a weekly and monthly budget so that you know where your money goes. Thirdly, they recommend that you monitor and track your spending and stick to your budget. If you do this, you will likely never have debt problems ever again in your life.
