Consolidating Your Debt: Is it Right For You?

Getting debt consolidation in Markham isn’t as simple as walking into a bank and asking for a loan. There are a lot of things to consider, such as what type of debt you have, your credit rating, whether to go through a bank, credit union, credit card company, or an installment loan creditor, if you should consolidate your debt, and many more. One of the easiest ways to see if consolidating your debt is the best option is by talking to a non-profit credit counsellor who can discuss the options with you and walk you through the process.

What is Debt Consolidation?

Debt consolidation is all about managing your many little debts by turning them into a single larger monthly payment.

The reason one larger payment is better than a number of smaller payment, is that typically the smaller outstanding debts have a high interest rate, particularly if they’re credit card and retail store debts. If you are careful, your consolidation plan will have you paying a lower interest rate, which makes it easier and cheaper to pay.

When getting debt consolidation in Markham, you have to ask for a loan that will cover your current eligible debts and no more. If you’re going through a bank and your application is accepted, typically the bank will pay the creditors directly, so you won’t have to deal with your creditors from the moment the bank takes over.

However if you go through another institution, you are responsible for paying off your creditors. Some people have gotten a debt consolidation loan, and rather than paying off their debts, go and buy something they ‘really’ need, ending up further in debt and not consolidating anything. Be careful you don’t do this.

Who Can Get a Debt Consolidation Loan?

If you have a poor credit rating, debt consolidation is harder to achieve. This is why if you’re in debt and you are about to start missing payments or sending them in late, you should seriously consider getting a consolidation loan as soon as possible. If your credit rating isn’t too bad, you may be able to proceed with debt consolidation, but your interest rates could be higher, which may make the monthly payments too high to bother with.

Debt consolidation in Markham also depends on your income. Can you afford the monthly installments, and still cover your monthly expenses. If not, you will probably be denied, or have to settle on a smaller debt consolidation.

A credit counsellor from a non-profit organization can be of help to you here, making sure you put your best foot forward, discovering if a loan is possible, and helping you convince the bank that you are serious about getting your finances under control.

Does It Cost Anything?

Consulting a credit counsellor does not cost anything. You’re simply going in and getting unbiased advice on how to handle your debt in the best possible way.

Now when you are consolidating your debt, after the non-profit credit counsellor has gone over your options with you, there are some fees.

Typically when going through a bank or credit union, there will be some fees to open the file. However these should be fairly small and manageable. If going through an installment loan creditor, there will be a number of fees, the better ones will be quite open about what they are, less legitimate creditors will have hidden fees, so always be sure to read the contract over very closely.

If you are consolidating high interest credit card to a low interest credit card, you will also pay fees, some hidden, some not. You will also want to make sure the low interest credit card isn’t for a limited time, such as six to twelve months, before going back to a high interest rate.

What to Do When Consolidating Debt in Markham

When you’re trying to consolidate your debt, don’t lie or try to hide things. You will be getting a credit check, so they will discover if you have more debt than you’re admitting to, or your credit rating is not very good. By being open about it, and explaining that you are getting things under control, it makes you look better.

Always ask about the interest rate, and make sure it isn’t for a limited time period. Even some banks will have a ‘teaser’ rate, which looks good on paper, but can leave you with big problems in the future, when your interest rate jumps. Also look at fees, conditions, the loan period, etc.

And finally, if you go through a bank, be ready for them to close some of your credit cards and store credit accounts. They’re taking a risk giving you a loan, and want you to pay it back, so they will insist that the ones with the worst interest rates, or that you don’t need for daily living be closed, so that you are not tempted to add to your debt.

Debt consolidation shouldn’t be seen as an easy fix to your debt problems. It takes time to prepare everything, and if you’re not careful you will be denied, or get a loan that you cannot afford which simply kicks the can down the street a little ways. Be sure to talk to a credit counsellor first, to see if debt consolidation is right for you, and if you are eligible for it.

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