Debt Consolidation

What is Debt Consolidation?

Depending on your debt amounts and overall financial health, you may consider debt consolidation. There are several reasons why people in Manitoba may require the debt relief that consolidation loans provide. Many people struggle with money management; taking on too many loans and spending too much money can lead to issues with debt. When considering all the options to assist you in dealing with your debt, a Licensed Insolvency Trustee in Manitoba will discuss the option of taking out a debt consolidation loan. While trustees don’t offer this service themselves, they can provide credible connections that do. A debt consolidation loan can be obtained to pay off any small debts you might have. Using a consolidation loan makes it easier since there is only one payment, and you may find that you qualify for a better interest rate.

A consolidation loan can compress your debt payments into one affordable loan, but it may not completely get rid of your debts. You may find that a debt consolidation loan doesn’t make much sense to you long-term, as it can potentially put you in further financial jeopardy if you can’t make the payments. Luckily, there are other ways to consolidate debts that our Licenced Insolvency Trustee and dedicated team of financial professionals can provide, such as a consumer proposal or bankruptcy. See the other services we offer.

Is Debt Consolidation My Only Option?

Debt consolidation may not be a viable option for you, but there are other options that you can turn to:

  • Consumer Proposal: Your debts may be consolidated into more affordable monthly payments, allowing more flexibility and designed to meet your unique needs. A proposal allows negotiation of a reduced total debt balance with your creditors and allows you to make monthly payments on the remaining portion for up to five years. A consumer proposal makes more sense than a debt consolidation loan if you’re unable to pay back the entire debt balance, plus interest. During a consumer proposal, you do not lose any assets. Once a consumer proposal has been filed, you will be protected against any collection efforts from your creditors.
  • Bankruptcy: Filing for bankruptcy will show on your credit history for 6 years following your discharge from the process, but can be completed in as little as 9 months. A consolidation loan can prolong your debt, and you may be asked to pledge your assets as security. If you then have trouble paying the consolidation loan, you risk losing any assets pledged against the loan. If it doesn’t seem like a consolidation loan makes sense for you, then bankruptcy is a good opportunity for a restart. The word “bankruptcy” may seem like a bad thing, but there can be financial benefits if you choose this path. Filing a bankruptcy can provide immediate debt relief, as well as freeze principal and interest payments, all while stopping harassing phone calls from creditors. Bankruptcy may also cost you less than a debt consolidation loan.

No matter how hard struggling with finances can be, there are always options to assist you. Don’t take on those debts alone. Make an appointment for a free consultation today and see if debt consolidation is right for you.

FAQs

How Do I Qualify for a Debt Consolidation Loan?

Individuals in Manitoba will have to qualify to receive a debt consolidation loan. Most financial institutions offer these loans but require specific qualifications, which can make them difficult to obtain. To receive a loan, your credit scores or income can play a factoring role. There are some cases in which you might need to offer some type of collateral to qualify. If your credit is too low or your income is insufficient, you may want to consider a consumer proposal instead, as it can receive better affordability rates. All of your options will be thoroughly explored with the help of our skilled team when you schedule a free consultation today.

What Happens After I Consolidate?

The point of the consolidation loan is to pay off any other loans or debts you may be struggling with. When those debts are paid, your only concern will be to pay off the amount given. There are other options to consider if you’re unable to make the required payments. A consumer proposal or bankruptcy may be a much more appropriate and affordable option for your financial situation.

How Will My Credit Be Affected?

Whether or not your credit will be affected will depend on how fast you can pay off your debt consolidation loan. Manitoba residents that pay off their loans will see little to no impact on their credit rating. However, any late payments or failure to meet the due dates of your payments can negatively affect your credit.

What Loan Options Are Available For Debt Consolidation?

There are a few different options for loans when it comes to debt consolidation:
Secured loans are a risky type of debt consolidation loans. You’ll have to put up an asset, such as your home or car, to ensure that your payments will be made. If you don’t pay on time, your assets can be claimed by the lender.
Unsecured loans are a less risky choice for borrowers, but can often come with higher interest rates and require a good credit score. There’s no requirement for putting up any assets as collateral, but your credit score can decrease if you default on your loan.
Guarantor loans are useful if your credit score isn’t the best. You may get a family member or friend to co-sign your loan. If they do, they may be able to get you a better interest rate in the process.

What Types of Debts Can I Consolidate?

Certain debts work better with consolidation loans, such as unsecured higher interest debts, like personal loans or credit cards. Manitoba residents should steer away from student loans and overdue taxes, as there are better arrangements, such as direct negotiating. Secured loans like mortgages, home equity lines of credit, and car loans, should not be included. You may have the possibility of renegotiating those secured loans into a consolidation loan which you may include with your unsecured debts.

What Are The Benefits of a Consolidation Loan?

Aside from the benefit of debt relief, there are many other reasons why Manitoba residents may consider a consolidation loan:
Debt consolidation loans won’t affect your credit rating if you can make a settlement for 100% of the balance owed.
The payments you have to make may be lower. Credit card debt often comes with higher interest rates, which means higher monthly payments. A loan with a lower interest rate would mean lower payments.
Lower monthly payments can mean your savings will increase.
It will be much easier to keep track of your payments with a consolidation loan; you’ll only have one loan to look after.

Are There Downsides to a Consolidation Loan?

While there are many upsides to receiving a consolidation loan but there are downsides as well:
You will still have to pay the entirety of the balance that you borrow.
You will still have to pay interest on your debt, which can become very high.
You might potentially have to offer up an asset, which can be seized from you if you can’t make your payments.
There is the potential that you may not qualify for a loan.
Consolidation loans may help reduce your debt issues, but they might not resolve the root cause of your financial situation.
The debt consolidation loan may not be affordable in the long run, which only delays creditor collection.