If you used a debt consolidation loan to repay your debt in full over the same period at an interest rate of 12% (compounded annually), you would pay around $330 per month for 3 years. Normally there is no cost to apply for a consolidation loan.įor example: If you had debts totalling $10,000 that you repaid in full over 3 years at an interest rate of 18% (compounded annually), you would pay approximately $360 per month for 3 years. If you’re able to qualify for a consolidation loan at a reasonable interest rate then it may cost you less to repay all of your debt through the consolidation loan than it would if you continued to repay each debt separately. While both consolidation loans and credit counselling programs mean you’ll have to pay back all of your debt, the key difference between the two is the interest and fees you are charged. A Consumer Proposal can consolidate and write-off consumer debts as well as tax debt, student loans and more. The only debt consolidation option that can be used to deal with government debts is a specialized debt settlement tool called a Consumer Proposal. This would include debts for things like credit cards, payday loans, overdrafts. What Debts Can I Consolidate?īoth bank consolidation loans and credit counselling plans can be used to pay general consumer debt. Credit counselling programs are offered through credit counsellors, some are for-profit and others are non-profit.Īll credit counsellors charge fees for their services, even if their organization is non-profit.Instead of consolidating your debts into a new loan, credit counselling serves to consolidate your debts into a settlement program and a credit counsellor facilitates a repayment plan for you to pay-off your debts in full, though there may be a break on the interest charged from banks that fund the credit counsellor. Learn more about Debt Consolidation Options in Canada. Because the bank is lending you money, they will usually require you to give them collateral of an asset and you will need to have a strong credit score to qualify.īe sure to understand the repayment terms of your loan – interest rates may vary and if your credit history has been impacted you may not qualify for “best rates”. Traditional debt consolidation loans are done through a bank or other financial institution.What is Debt Consolidation?ĭebt consolidation is a broad term that basically means that multiple debts will be combined into one new debt, either a loan or settlement. Although both options can combine all your debt together, they are two very different options and may not be the best debt solution in every situation. Another debt solution that is a type of debt consolidation is a credit counselling program, often known as a Debt Management Plan (“DMP”). One of the first debt management tools most people research is a debt consolidation loan.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |