READ OUR REVIEWS

Is a Debt Consolidation Loan the Right Solution? Ask Our Experts

Posted on 10 May 2017

When considering whether a debt consolidation loan is the right solution to your debt problem, it is important to understand the different solutions available as well as which solution is a loan and which actually reduces your debt.

Debt Consolidation Loans

Debt consolidation loans are loans that consolidate your debt with one institution. Unsecured credit such as loans, credit cards and some lines of credit are the typical products that can be consolidated with this type of loan. The benefits are reduced interest and a single monthly payment. However, there are cons as well:

  • Usually you need good credit to be approved – and if you have bad credit your interest could be very high.
  • Often the interest is higher than a mortgage, so it may make more sense to refinance your house.

Mortgage Loans

Mortgage loans – mortgages and home equity lines of credit. This is another popular option for consolidating debt, one that can help you regain control through a single monthly payment. First mortgages offer lower interest than second mortgages and lines of credit. As with a traditional debt consolidation loan though, there are negatives:

  • Approval is difficult with less than stellar credit.
  • Often the debt is extended over 15, 20, 25 years (the life of the mortgage), stretching out your debt repayment schedule.
  • Administrative costs can add up: you may need to incur legal fees and/or administrative fees to renegotiate before the end of the current mortgage term.

Consumer Proposal

A consumer proposal is one option that actually reduces your total debt. It is negotiated through a Licensed Insolvency Trustee, an individual who will present a proposal to your creditors that, when accepted, results in a reduction of your overall debt and a single monthly payment. Interest stops accumulating at once and you can pay it off over the course of five years or sooner. A consumer proposal term is often far shorter than those listed above, meaning you will have the debt paid off rather quickly. While it may impact your credit, if you’re struggling as it stands, this has likely already happened.

Bankruptcy

Bankruptcy is another option for reducing your total overall debt. Like a consumer proposal, a bankruptcy is filed through a Licensed Insolvency Trustee. It involves making a single monthly payment to a trustee (first-time bankruptcy), over a term of typically 9-21 months. Interest and most collection action is stopped.

When you’re struggling with various monthly payments, payments that seem to get you nowhere, you may be thinking that a debt consolidation loan is the way to go. If this is the case, you should talk to a professional to understand all of your options. Remember, a debt consolidation loan does not reduce your overall debt – only a consumer proposal and bankruptcy can do that.

For more on dealing with debt that is keeping you up at night, please visit www.spergel.ca today or call 310-4321 for a free phone consultation.

Helpful starting information:

What to Bring to an Appointment

To get the debt help that you need, please bring a list of who you owe and how much to each, a list of everything you own and your monthly household budget. Don’t have everything right away? Don’t worry – We will guide you through each step.

Download Form

Your Information

We’ll walk you through our application process. But, if you want to prepare for your debt free assessment consultation in advance, download our information form and fill in what you can.

Download Form

Calculate Your Debt Repayment Options

How can you compare your debt repayment options if you don’t know how much they will cost you? Your solution will become much clearer when you are able to compare costs.

Debt Calculator

Ready to Be Debt-Free?

If you’re ready to be debt free, it’s time to meet with one of our knowledgeable Licensed Insolvency Trustees at your convenience and get started

Meet with a trustee