Many facets of adult life are overwhelming, and debt is one of them. The ability to access personal debt has advantages, to be sure. It allows consumers the power to finance purchases that might otherwise be beyond their means, including buying passenger vehicles and residential homes. On the other hand, that power also comes with the peril of racking up too much debt, being burdened by minimum payments, and interest rates that keep the debt alive for a long time and even growing. Fortunately, debt consolidation options can help you manage your finances toward becoming free of debt.
What Is Debt Consolidation?
The process of debt consolidation involves rolling numerous debts into an individual payment. This is especially useful if you have multiple credit card debts. Reorganizing multiple debts into a single monthly payment simplifies your billing and obligations. Also, moving any debts from higher to lower interest rates can save you money over time. Your cumulative debt load will decrease, and you can pay everything off faster. Debt consolidation is a solid strategy for improving your financial management.
Pros and Cons for Canadians
The advantages of debt consolidation make it worth considering for many Canadians. They include simplifying your monthly payments and lower interest rates. In some cases, you might see lower monthly payments overall to improve your cash flow and help you pay down debts faster. As your debts clear up, your credit score should rise over time.
However, there are disadvantages you need to watch out for. Debt consolidation might extend loans longer in ways that increase your overall debt load. Additional fees can add up, too. Missing payments on secured loans can put some assets at risk of foreclosure or seizure, and missing payments on any loans can hurt your credit score. Scam lenders might victimize you with their loans, and poor credit scores might disqualify you from consolidation loans.
Debt Relief Options in Canada
If you want to consolidate some or all of your debt, you have multiple debt relief avenues you can explore:
Car title loans
Consolidation loans for credit card debt
Consumer proposals
Debt management plans
Debt settlement
HELOC
Refinancing your mortgage
Transferring balances to lower interest rates
Unsecured personal loans
In some cases, you might utilize more than one of these techniques as part of your comprehensive debt-management strategy.
Consider Your Options
Once you have made a list of all of your existing debts and learned your options for paying them off, it’s time to make a plan to manage everything. Be flexible in your payment timeframe; as badly as you want to get all this done, your schedule needs to be reasonable and affordable.
The bigger decision might be which debts you tackle first, and there are several ways to approach this. Paying off high-interest-rate debts first can save you the most money over time by curtailing the growth of your debt. Alternatively, knocking out your lowest balances first helps engender a sense of accomplishment that fuels a snowball of success into larger debts later.