Debt consolidation is the plan of attack you want to go with when you’ve made a decision to get out of debt as cheaply as possible and more rapidly than high-interest rates permitted.
Not everyone stands on equal footing when it comes to money management skills. Some just have a natural flair for saving money and making it grow, while some of us could use a little help in that department.
Perhaps you made the mistake of choosing to go the payday loan route and are now finding yourself struggling to get out of that mess (you’re not alone) and actually find yourself borrowing even more money to get out of that debt. It truly is a vicious cycle.
This is where debt consolidation comes into play.
Repaying principal and interest has proven, time and again to be a knockout punch that takes far too many Canadians each year.
So what is the fastest way out? Lowering your interest rates. Once you lower those rates, you can put more money down on the principal and that, in turn, lowers what you’ll have to pay month-to-month.
How does debt consolidation help you accomplish this?
Think of debt consolidation as a wide, far-reaching net that you’ll dump all of your creditors into.
You use your debt consolidation loan to pay off all your debts in one shot and then repay only one loan at a lower interest rate than what you were paying beforehand.
Putting debt consolidation loans in perspective
Let’s say you have a $5000 loan with an interest rate of 25.99%.
And another $3000 in outstanding money at a rate of 21.99%
Would you rather use a debt consolidation loan to repay both amount right away and then repay the loan at a rate of 15%, 16% or 17%?
A difference of 10% interest could mean thousands in saved money.
Another positive aspect from debt consolidation loans: A new habit is formed
When you’re struggling to meet minimum payments and find yourself only going backwards with your finances, it’s easy to get resentful with having to spend money on debt and just want to splurge to feel human again.
However, once you start to feel the difference debt consolidation brings and watch your debt melt away faster and faster each month, it becomes easy for you embrace the habit of taking the money you were spending on debt repayment and applying it to savings instead.
In one year, you can go from being in debt to having a nice stash of savings that are collecting interest for you and growing. Food for thought.
So, with all that we’ve covered, it’s pretty apparent that debt consolidation is a pretty wise move – so how do you get started on the path to a debt-free life?
The A-B-Cs of finding the right debt consolidation loan
The one biggest challenge you’ll find with securing debt consolidation loans is that banks can be pretty iffy about issuing the loans.
They’re really not crazy about anyone carrying a large amount of debt.
To access a loan through a bank, you’ll need:
- Good credit – banks are real sticklers for this
- Typically, the banks will expect you to have something to offer as collateral; property, fully paid-off vehicles. What they’re after is security.
- Of course, you’ll also need income you can prove to be current
Typically, the banks expect you to meet all three of these points of your application for a debt consolidation loan is dead in the water.
Option B: In Case The Banks Reject Your Application
Got rejected by your bank? Join the club and DON’T let it affect how you feel about yourself. Hundreds of thousands of Canadians live the same experience each year.
See, banks really don’t care how long you’ve been a client of theirs – they’ll put money over relationships every day of the week.
Ready for the good news? Even if your credit isn’t perfect or you don’t own your own home, you still have avenues to land a debt consolidation loan and have the same opportunity to pull yourself out of debt like other people do.
That option comes by way of private lenders such as LoanAway.
What is different about private lenders? They understand that not everyone has stellar credit and could use a bit of help. So if you have bad credit you’re encouraged to apply because that is not a deal breaker by any stretch.
What’s most important to a private lender is stable employment. With that, most private lenders feel you have the means to make payments on the money you owe, regardless of whether or not you have any collateral to put up.
At LoanAway, what need to know is that you’re not in the midst of a consumer proposal or bankruptcy filing.
Learn how Loan Away can help you get out of debt.
Words of wisdom regarding debt consolidation loans
Once you’ve used your loan to pay off your credit cards, it’s strongly recommended that you cancel your cards to avoid the temptation to run up the debt again. This happens more than you think because you feel like the “coast is clear”.
That’s a huge trap – be careful not to fall into it! Apply for a loan now