Debt consolidation. 101 Guide
The first question that we need to be answered is, ‘What is a debt consolidation loan?’ A debt consolidation loan refers to when a person takes out a new loan in order to pay out any number of smaller bills, debts or loans on which they’re presently making payments.
By doing this, they coalesce all of their debts together, making them into a single loan, requiring a single monthly payment. The fact they this brings together multiple debts, combining them, or ‘consolidating’ them, is what makes it referred to as a debt consolidation loan.
How to get a debt consolidation loan
A debt consolidation loan Canada can be acquired in 8 commonly employed ways. Each option comes with its own sets of advantages and disadvantages and every method is not available for everyone. You need to explore each option to decide which is the best for you.
But before you can decide which option to choose for, you have the ask the preliminary question of whether or not debt consolidation is right for you in the first place. In order to do this, you can use a debt consolidation loan calculator. This is designed in order to help people figure out whether debt consolidation is right for them. You can find these online. All you need to do is fill out the numbers, the amounts you owe on your loans, credit card balances and other debt that you owe. This will then calculate what your monthly payment on a consolidated loan would be. You may have to try to adjust the loan rates, types and terms until you come upon a consolidation plan tailored to your needs.
Debt consolidation loan
This involves a finance company, credit union or bank providing you with the money you need to pay your debts, consolidating them together into a single big loan. The advantage is that you have just the one monthly payment to make. The interest rate is low, saving you money. The debt is usually scheduled to be paid off in 2-5 years. Fees for this service are low.
The disadvantages are that these loans normally require collateral (security); they require good credit scores; their interest rates are high compared to home equity loans, and interest rates are high for unsecured loans.