If you’re struggling with unmanageable debt, a debt consolidation loan may be the key to solving your financial problems. A consolidation loan allows you to combine a number of existing debts into one monthly payment, making debts easier to manage and allowing you to contribute to multiple debts with a single deposit. Debt consolidation loans in Niagara Falls, Ontario, are available from banks, credit unions, private lenders, and other financial institutions.

How Does Debt Consolidation Work in Niagara Falls, Ontario?

The basic concept of debt consolidation is that a borrower who has two or more small outstanding debts takes out a single, larger loan to pay off all of those existing debts. Once the existing debts are paid off, the borrower is liable for the amount of the consolidation loan.

Depending on your financial situation, a debt consolidation loan can be a useful way to make monthly payments more manageable. For example, imagine you have both credit card debt and student loan debt. If this is the case, you’re going to be making two monthly payments, to different lenders, possibly at different times of the month. Juggling multiple payments can make budgeting tough, and it can be more difficult to work around your income schedule. A single consolidation loan means you’re liable to just one lender, and your interest rate will often be lower than the combined interest of all your outstanding debts, particularly if those debts are unsecured.

Debt consolidation loans are often secured, meaning you’ll need some form of collateral to qualify for a loan. A debt consolidation loan may be secured against your home, or you may require a cosigner.

Is Debt Consolidation the Right Solution for You?

Debt help in St. Catharines and Niagara Falls is available, but before you apply for a loan, determine whether the solution is right for you.

A few advantages of debt consolidation are:

  • It lets you reduce the total amount of your credit charges
  • It allows you to consolidate multiple bills into just one bill
  • Paying off outstanding debts eliminates calls from collection agencies
  • In some cases it can allow you to pay off debt faster

If you have several unsecured debts or you owe money on multiple credit cards, a personal loan for debt consolidation might be a good solution for managing your debt. Credit cards often carry relatively high interest rates, so if you have a large amount of credit card debt across multiple cards, you’ll likely be able to find a consolidation loan with a lower interest rate than the average of the different interest rates on your credit cards.

Debt consolidation loans aren’t a perfect solution, and they aren’t for everyone. If the sum total of all your debts is quite large, you may not be able to get a consolidation loan that covers all of the payments. In this case, a consolidation loan won’t really help, as you’ll still be liable for multiple bills.

If your credit rating is poor, you can expect to pay significant interest fees on a debt consolidation loan. Consolidation loans are used by many people to blend their credit card debt, but if you’re still regularly using the cards that you owe on, a debt consolidation loan could potentially compound your debts. For this reason, you shouldn’t consider a debt consolidation loan without first devising a workable budget and committing to paying off debt without accruing new debt in the meantime.

When Should You Consider a Debt Consolidation Loan?

There are a few different reasons why people apply for debt consolidation loans. Some common reasons are:

  • Difficulty making monthly payments or meeting expenses
  • A desire to reduce monthly credit card dues
  • Frequent, disruptive calls from collectors or lenders
  • Too many bills or difficulty managing multiple bills

If any of these reasons apply to you, it could be worthwhile to apply for debt consolidation in St. Catherines or in Niagara Falls. Debt consolidation can be a good option if your income has increased, and you can manage financially without relying too heavily on credit cards or lines of credit.

Qualifying for Debt Settlement

debt consolidation form

Debt settlement is a term that is sometimes used interchangeably with debt consolidation. Like consolidation, debt settlement is a process wherein a third party company negotiates with lenders on your behalf to settle outstanding debts. The amount required to pay off a debt in a settlement is often lower than the combined outstanding amount. If the debt settlement company is able to reach an agreement with your lenders, you’ll pay the settlement amount to the company, who will then pay off your lenders on your behalf.

Whereas debt consolidation loans can be obtained from banks and other federally regulated financial institutions, debt settlement is sometimes offered by private debt settlement companies that charge a fee for their services. Be careful of debt settlement offers that seem too good to be true.

You can usually qualify for debt consolidation as long as your credit score meets the lender’s minimum requirement, you have enough regular income to reasonably pay off such a loan, your existing debts aren’t unmanageably high, and you can offer some form of collateral.

Debt Consolidation Options

If you think that debt consolidation is the right solution for you, it’s time to look into your options. Debt consolidation loans are available from banks, trust companies, credit unions, and private lenders — the lender you choose to go with will depend on your financial situation and the types of debts that you want to consolidate.

Some types of loans that you can consolidate are:

  • College debt
  • Automobile loan payments
  • Credit card payments
  • Property improvement loans

Before looking into consolidation loans, it’s a good idea to get a free credit report. A free copy of your credit score can be obtained from Transunion or Equifax. Go over the report thoroughly to make sure the credit report is accurate. When you’re applying for loans, it’s important that your credit report is up-to-date and shows the current state of your finances, especially if your credit score has improved since your last report. A lower credit score can make you eligible for better interest rates, which will make debt management even easier.

Pay Down Debt and Improve Cash Flow

Consolidating your debt, in many cases, frees up extra cash and makes budgeting a lot easier. With just one monthly payment to worry about, you may be able to better allocate funds from your monthly income to better support your living expenses while continuing to pay off your debt.

Credit Counselling and Debt Consolidation

If you’re struggling to keep up with multiple monthly payments, talk to an experienced lender or broker about credit consolidation. St. Catharines and Niagara Falls are home to a variety of lenders and financial experts like those at Mortgage Broker Store. The education and budgeting tools obtained through credit counselling can provide you with the financial insight to improve your debt situation and finances, and to work toward becoming debt free faster.

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