Each person’s financial situation is different. What works for one person may not be the best option for someone else. Getting a loan will depend on several factors, including your credit rating, how much debt you owe, how much interest you pay, and various other aspects. This means that there is no “best debt consolidation” option for everyone. Each situation is different and each person will need a different type of loan or plan to meet their needs.
What you should be looking for isn’t the best debt consolidation Canada, but the best debt consolidation loan for you. So, what kind of loan is that?
A Good Debt Consolidation Should Have
The best consolidation loan is one that is actually going to help you pay off your debt in a reasonable amount of time and with the lowest cost of borrowing possible. The best consolidation loan also has the following characteristics:
From a reputable lender;
It’s often better to work with an established lender than one who has not been in business for as long or one that does not have a successful track record
No other hidden fees or charges;
Before you sign a contract for debt consolidation services, make sure you read the agreement fully and understand if there are any charges or fees associated with the loan
Reasonable interest rate;
One of the main goals of a consolidation loan is to lower the overall amount of interest you pay, so it’s important to get a loan with an interest rate that works for you
Interest rate is lower than your existing debts;
Again, one of the most important reasons for consolidating your debt is to reduce the amount of interest you pay on your debt. If the rate on your consolidation loan isn’t lower than the rate on your existing debt, then the loan won’t help you reduce your debt more quickly
Monthly payment is affordable and fits within budget;
This is critical. While a consolidation loan can reduce how much you pay in interest, it doesn’t reduce the overall amount you owe. Therefore, before you get a debt consolidation loan, make sure the payments are affordable for you. If they are not, this option may not be the right one for you.
Can be paid off in five years or less without using other credit;
As mentioned, one of the goals of consolidating your debt is to make it manageable so you can repay it. If it’s going to take you more than five years to repay your consolidation loan, or if you’ll need to use other credit to pay it off, you may wish to consider other options.
Can be paid off early with no penalties;
If you’re in a situation where you are able to afford to increase your payments and pay off your debt more quickly, you want to be able to do so without being charged a penalty
Will improve credit score if paid on time
Make sure that the lender reports the loan to the major credit bureaus, so they know that you have paid it off on time
Keep in mind that, while refinancing a debt into an existing first mortgage is an attractive way to substantially reduce the monthly payment on debt, it also may add substantially to the interest and other charges, as the debt will be amortized over the longer term of the mortgage, which can be as long as 25 years. So, while refinancing reduces stress on the monthly budget, it can result in a higher overall cost of borrowing.
What Are Debt Consolidation Services?
If you have a lot of debt, you’ll quickly find that repaying it is difficult. This is often because many debts have very high interest rates. Even if you make your payments each month, it will take a very long time to reduce your debt and it will cost you quite a lot to do so. Interest charges can make each of your monthly payments higher, which can make it more difficult to repay your debt.
If this is the situation that you are in, you may wish to consider debt consolidation services. Consolidated debt counselling services provide loans that you can use to repay your existing debts. If you have many different high interest debts and you take out a new loan with a lower interest rate than the debts you have, you’ll save money on interest charges. This will mean lower monthly payments and you’ll be able to repay your debt more quickly.
If this sounds like a situation that could benefit you, you’ll want to find the best debt consolidation loan available. Speaking with consolidated debt counselling services can help you understand what you may need.
Overall, remember that there are many different options available and that the best debt consolidation option is the one that works for you and your financial situation.