Debt consolidation is a type of debt restructuring whereby you take out a new loan to pay off your outstanding loans. Instead of making multiple payments to different creditors, you only need to worry about one monthly payment. You can then take control of your credit card balances and pay off your debt effectively.
What are the advantages?
Debt consolidation can help you plan your finances more easily because you only have to repay one debt per month. This can also help you repay your debt faster because if you keep your monthly payment single, you can usually get a lower interest rate.
What are the risks?
A risk associated with debt consolidation may be to gain confidence prematurely in the face of your debt situation. You may feel that you are in control of your debt situation, but if you return to bad spending habits, you may incur more debt and be at greater risk.
If you are concerned about this, talk to your licensed insolvency trustee who may be able to suggest a debt repayment plan or recommend credit counseling to help you repay your loan effectively.
- Information about your assets
- Recent tax returns
How to apply for a debt consolidation loan?
You can apply for a debt consolidation loan at any financial institution, including your local bank, a savings and credit cooperative, or any lender with sufficient funds to finance your loan.
If you choose to go with another lender, be sure to provide your monthly budget and a pay stub to show that your income can cover the loan. A co-signer may be needed to secure your loan. You may be asked to bring the following other documents:
Is debt consolidation the solution that suits me?
Deciding to take out a debt consolidation loan can be a difficult decision to make, so let us go ahead with any concerns you may have.