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    Help With DebtMany people who are struggling to pay down debt consider getting a debt consolidation loan to help them out. Debt consolidation is a situation where you combine your various outstanding debts into a one monthly payment. The most common way of doing this is to get a debt consolidation loan from a bank or private lender. With a debt consolidation loan, the goal is to get a loan that has a lower overall interest rate than your original debt. Doing so will lower your monthly payments and reduce the amount of money that you will spend on interest. Since the goal is to lower the overall amount that you will spend on interest, you should obviously not take any loan that does not have a lower overall interest rate than your existing debt. Some companies offer debt consolidation loans or debt consolidation services that simply combine your debts into one monthly payment. While this option simplifies the process (since you only have one bill to repay instead of several) it does not save you any money. To find out whether or not debt consolidation can help you, you’ll need to compare how much you’re expected to pay now (total of all bills, including interest) with how much you will be asked to pay under debt consolidation. The amount you are expected to pay under debt consolidation should be less than what you are paying now.

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    Potential Problems with Debt Consolidation

    In order to qualify for consolidation, you will need to have a decent credit rating and a steady income as well as a good history of repaying your bills. In cases where you have a poor credit history or problems with your credit rating, you may be asked to put something up as security against the loan (such as your home). As you can see, the above situation can be a potential problem with debt consolidation. In order to get a loan with a favourable interest rate, you will need a steady income, a good credit rating and a strong credit history. Some people who have high levels of debt or who are having trouble repaying their bills may not be able to get a debt consolidation loan or, if they are, the loan given to them will have a very high interest rate. This situation does not save you money and could even cost you money. Unfortunately, if you’ve missed paying bills in the past due to having more debt than you can handle, your credit rating has likely already been damaged. This can make it very difficult to get a debt consolidation loan that will benefit you.

    Debt Consolidation Alternatives

    The good news is that, even if you can’t get a debt consolidation loan, there are options available that can help you repay your debt. Speaking with a licensed insolvency trustee can help you understand the debt relief options that are available to you. Some people worry that, because of the name, a trustee in bankruptcy is only there to help file for bankruptcy. This is not true. While a trustee is legally able to administer a bankruptcy, he or she is also trained to review financial situations and provide you with information on the available options. One option is a consumer proposal. A consumer proposal is a legal process through which you make an offer to your creditors to repay them on terms that are possible for you. In most consumer proposals, you offer to repay a portion of your debt over a specific period of time. Consumer proposals are usually paid in monthly payments. Once all payments have been made, your remaining outstanding debt is forgiven. A consumer proposal is sent to all of your unsecured creditors. They will then need to vote on whether or not they will accept your proposal. If the majority of your unsecured creditors vote to accept, then all will be bound by its terms. One of the main differences between a consumer proposal and debt consolidation is that a consumer proposal reduces the overall amount that you are expected to repay while debt consolidation typically only reduces the interest at best. If you are having trouble repaying your debts, you may wish to investigate the consumer proposal option by meeting with a trustee for a free consultation.