Getting on track to being debt free can feel impossible. If you are dealing with high interest rates, outstanding debt, and struggling to make monthly payments, then you need to know about how you can get debt relief, specifically debt consolidation loans.
A debt consolidation loan is a loan you use to pay off debts. The purpose of the loan is to group all your debts under one account, payment plan and lender.
Debt consolidation loans are becoming more common across Canada and in Belleville, as Canadians look for new ways to simplify their payments and become debt free. With nearly 20,000 Belleville residents reporting no employment income on the last census, understanding how to accumulate wealth and reduce debt is becoming more vital for the financial health of Belleville.
Should You Pay Debt Before Saving?
Deciding whether to pay a debt or save is a challenging choice to make. Here are the main pros and cons of saving and paying debt.
Pros of Saving
- You are prepared for a financial emergency
- If the interest on your debt is low, it might be more prudent to save more of your income for investments, savings interest and building up an emergency fund to support yourself in times of hardship.
Cons of Saving
- If you have debt with a high interest rate like credit card debt, then you need to focus on paying that off. If you are paying more for interest on debt than the interest your savings earn in the bank, you are losing money by saving it instead of paying off the debt.
- Saving too much without paying your debt could leave you with too much to pay off later on in life making living comfortable even harder.
Pros of Paying Debt
- As soon as you start paying off the principal amount you will notice a reduction in your interest costs since the total amount owed is decreasing. This can make interest payments much cheaper over time so its best to start early in most cases.
- Paying debt on-time increases your credit score.
Cons of Paying Debt
- You have less disposable income for your savings, investments and personal life.
- Little to no savings can leave you unprepared for changes in your employment, health and budget.
When it comes to deciding whether to save more or pay off debt, evaluate the current status of savings and compare it with your debt payments.
If monthly interest from your debt is higher than that of your savings, a larger share of your income should be used to pay back the debt. If interest rates from your debt are very low, you should use more of your money to grow investments and your savings while keeping up with the minimum payments to protect your credit score.
How to Consolidate Your Debt with Bad Credit
Having a bad credit score makes getting a loan from a bank or major financial institutions increasingly problematic. In most cases, a credit score below 650 is considered bad credit and unlikely to get a loan. You can check your credit score on TransUnion and Equifax’s websites to determine your loan eligibility.
Even with a low credit score you might still be able to get loan approval, here’s how.
Improve Other Areas Before Asking for The Loan
Lenders will look at your income, payment history and assets along with your credit score when determining your approval for a debt consolidation loan in Belleville. Your financial strength in each of these areas will be evaluated to help determine your loan eligibility.
Use Equity to Secure the Loan
Even with bad credit, having equity you can use to secure the loan drastically improves your chances of getting the loan approved and at low interest.
When using equity to secure a loan the lender will provide the funds based on the current market–value of the property. There are several ways to use equity to secure debt consolidation loans like home equity loans, first or second mortgages and mortgage refinancing.
Private lenders can approve loans solely based on equity regardless of your credit score.
With at least 20 percent equity in your home, you can receive a loan up to 80 percent market-value from a private lender. Private lenders typically charge between 7 and 12 percent interest along with fees from 3 up to 6 percent of the total loan. Considering interest for credit card debt can cost over 20 percent for late payments, using a private lender for your debt consolidation loan in Belleville might be the best alternative to a bank.
Finding Debt Consolidation Lenders in Belleville
If you have bad credit and need a debt consolidation loan you need to know what your options are. Rushing into the wrong loan can leave you in worse financial trouble than before.
At the Mortgage Broker Store, you can speak directly with lenders from across Belleville and southern Ontario to find the best deal for your debt consolidation loan. With a free consultation, you can speak with our lending professionals to learn more about how you can qualify for debt consolidation loans and become debt free once and for all.