Debt Consolidation Options for Albertans
For some Albertans trying to deal with their debt, a debt consolidation loan may be a tool that they are considering, but is it the right option for them?
What Is a Debt Consolidation Loan?
Debt consolidation loan is a loan that replaces all or some of your unsecured debt by paying it out, in favour of one new loan. Some of the benefits are:
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You now have one monthly payment instead of several smaller ones.
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Overall the payment will be lower per month than the total of the payments you were previously making on the unsecured debt, like credit cards.
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The interest rate on the consolidation loan is normally lower than what you were paying to carry the credit card balances.
Is Debt Consolidation Right For You?
Being able to obtain a debt consolidation loan will depend on certain factors, such as:
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Having an income that will support the debt consolidation loan payment.
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Having a good credit score.
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What other debt do you have that could impact your borrowing capacity such as a mortgage, vehicle loan, trailer or RV loan, RRSP loan etc.
Where does debt consolidation fail?
We often see people who have consolidated their debt, only to be back in debt within 12 months after the consolidation. This typically results from the individual not making any changes to their spending habits or not reducing their access to credit when they did the consolidation loan. There can be external factors that can lead to once again being in debt, such as loss of employment or experiencing unexpected expenses such as vehicle repairs, or separation and divorce.
Debt consolidation can be used as a tool to strategically tackle your debt, but it may not always be the best option for everyone. Still not sure if it’s right for you? Book a free, no strings attached call with us at correctthedebts.com/contact-us/ or call us at 403-836-6690.