Debt Consolidation in Canada: The Key to Financial Freedom
Debt consolidation and the possible debt-overcoming steps
Due to the recession hitting many countries worldwide, Canada is no exception and has been facing a recession.
There are factors other than the recession that has put a financial burden on the shoulder of citizens, and more people are falling into a debt spiral.
There are factors other than the recession that has put a financial burden on the shoulder of citizens, and more people are falling into a debt spiral.
It is overwhelming when you are in debt, but it does not have to be that way.
Several options give you a helping hand when you are coming out of the swamp of debt.
Debt Consolidation is an option you can choose to ease your financial burden so you can steer your journey back on the right track.
In this article, we should understand what debt consolidation is and how it works.
Debt Consolidation and Its Working
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If you have fallen into a debt trap and are looking for options to come out of this swamp, you might have heard the term debt consolidation.
● However, you might not know the workings of debt consolidation.
● A debt consolidation binds all your pending loans into a single big loan.
It is a popular option for people unable to repay their loans.
A single payment reduces the interest rate as it merges your multiple loans.
● You get peace of mind as you must repay a single loan and not burden yourself with multiple loans.
● It becomes easy and cheap to maintain this consolidated loan.
● Your debt can slowly decline through this simple yet efficient trick.
You have different options available when interested in debt consolidation.
The type that the majority of people prefer when opting for debt consolidation is borrowing a personal loan.
After borrowing a personal loan, you can repay all your remaining loan dues and reduce your multiple loans into one debt.
Types of Debt Consolidation
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There are several debt consolidation solutions that you can choose from:
- Opting for refinancing or borrowing a second mortgage.
- Using your retirement account for withdrawing and borrowing.
- Using your balance transfer credit cards.
- Borrowing a loan against your assets.
Financial advisors have advised that whatever type of debt consolidation you choose must be calculated so that you save money instead of spending more money than before.
After taking the debt consolidation, if your loan payment is more than when you had multiple loans, this is not the right choice.
● The ideal strategy is figuring out the types of debt you are consolidating and how much you pay towards your monthly payments.
Example of Debt Consolidation
There are various debt types that you can consolidate, but the most common debt that people consolidate is credit card debt.
● A credit card’s interest works interestingly, and its debt can be complex to repay if it is piled up.
● A grace period is offered by the credit card issuer before transactions are reflected on credit card bills.
If you fail to pay back your due amount during this grace period, you will start to rake in additional interest amount.
A credit card works on the compound interest principle and is compounded daily so the debt you will accumulate over time is overwhelming.
● Maintaining your regular expenses + paying this credit card debt strains your pocket and peace of mind.
● Consolidating this debt can lead to it dissolving quickly, as it reduces the interest you must pay.
Places That Offer Debt Consolidation Loan
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You can consolidate your loan at two places:
- Financial Institutions (Banks and Credit Unions)
- Private Lenders
Financial Institutions (Banks and Credit Unions)
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Financial institutions such as banks and credit unions offer debt consolidation loans and are known as traditional lenders.
● These lenders are known for offering a loan with a low interest rate.
● Banks and Credit Unions offer customers multiple products at a low-interest rate.
It can become relatively easier for your approval process to go smoothly through these lenders.
● However, before sanctioning the loan, you must visit your financial institution which would be uncomfortable and inconvenient for you.
The earliest date when you will receive this fund is a week after your loan gets sanctioned.
Private Lenders
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A private online lender can be the go-to guy in some scenarios when opting for a debt consolidation loan.
● This lender can provide you with instant funds and the longest duration that you have to wait to receive funds is 48 hours.
● Some lenders also provide you with funds the same day you apply.
It gives you the convenience of receiving the funds early without being hectic for your busy schedule.
They offer you an interest rate at a competitive rate or a slightly higher rate than financial institutions to provide you convenience.
Conclusion
Consolidating multiple debts into a single one can help you get out of a debt spiral if you are facing one. You must browse through multiple lenders to find the ideal loan.
