What is debt consolidation and how does it work?

Debt consolidation means taking all the money you owe from different places and putting it together into one new loan. This makes it easier because you only have to pay back one loan instead of many. Debt consolidation can help you simplify your payment each month and make it easy to manage instead of multiple loans.

What types of debts can be consolidated?

In Canada, you can usually combine many kinds of money you owe into one loan. This includes money owed on credit cards, personal loans, lines of credit, and sometimes even bigger loans like those for cars. But, not every debt can be put together, e.g. mortgage.

Who is eligible for debt consolidation in Canada?

To combine your debts into one, you need to meet some conditions. You should have a steady job so you can show you can pay back the new loan. Your credit score also matters. If your score is good, it’s easier to get approved. But even if it’s not good, there might still be options for you.

Are there any risks associated with debt consolidation in Canada?

Yes, there are some risks when you combine your debts. If you get a new loan with a long payback time, you might end up paying more money in the end. Also, if you use your home as a guarantee for the loan and can’t pay it back, you might risk losing your home. It’s important to make sure you can handle the new loan so you don’t end up in more trouble.

How does debt consolidation affect credit scores in Canada?

When you consolidate your debts, it can change your credit score. At first, your score might drop a little. This is because you’re closing old accounts and starting a new loan, which can make lenders a bit cautious. But, if you keep up with the new single payment and manage it well, your score can improve.

What is the difference between a debt consolidation loan and a debt management program?

In a debt consolidation loan, you get a new loan to pay off all your different debts, and then you just have one payment to worry about. In a debt management program, on the other hand, you don’t get a new loan. Instead, a credit counsellor helps you make a plan to pay your debts.

How do I choose the right debt consolidation option for my situation?

You should look at what you owe and your monthly budget. If you have a steady income and good credit, a consolidation loan might be a good fit. If your credit isn’t good enough or you need more help, a debt management program might be better. It’s important you compare the costs, terms, and how each option affects your credit before going ahead.

Can I consolidate my debts in Canada if I have bad credit?

Yes, you can still consolidate your debts in Canada even if you have bad credit. If you have a lower credit score, getting a traditional loan might be tough. However, there are special options for people with bad credit, such as secured loans where you use something valuable you own as collateral. There are also debt management programs like filing for a consumer proposal or bankruptcy.

How long does the debt consolidation process take in Canada?

The debt consolidation process in Canada can vary. It might be quick if you’re just getting a loan and paying off your debts right away. This could take a few days to a few weeks. But, if you’re going through a debt management program, it can take several years to complete because it involves setting up a plan and making regular payments. The exact time depends on your specific debts and the solution you choose.

Are there any fees associated with debt consolidation services in Canada?

Yes, there can be fees when you use debt consolidation services in Canada. If you get a consolidation loan, there might be fees for setting up the loan or for doing credit checks. In a debt management program, there’s often a setup fee and a monthly fee for the service. It’s important to ask about all the fees upfront, so you know what you’re paying.

Conclusion 

A debt consolidation loan is a great idea when it comes to debt management. However, before you opt for any debt solution, you should speak with one of our debt experts at EmpireOne Credit. You need to get assistance and counsel to understand which way to go. Managing debt alone is not an easy task, but there’s help available. Your debt could be reduced by up to 80%, and interest will stop immediately. Call us at (416) 900-2324 to schedule a free consultation with us. Being debt-free feels good!