Debt consolidation loans are increasingly becoming popular, but what benefits can you get if you decide to apply for a debt consolidation loan in Canada?
Debt Consolidation Loan
A debt consolidation loan is a type of loan that an individual with a lot of various loans can apply for in order to convert multiple loans into 1 easier-to-manage loan. People apply for a debt consolidation loan because having just 1 loan to think of means it is easier to keep track of and pay, not to mention that most types of debt consolidation loans offer lower interest rate than other loans such as personal loan, credit card loan, and car loan. An interest rate difference of just 1% can mean saving thousands of dollars down the line.
Advantages of Debt Consolidation Loans
There are many benefits of debt consolidation loans. They are:
- Easier to fit into one’s budget because there is only 1 monthly fixed rate payment
- With a set time frame
- Usually with a lower interest rate, saving you a lot of money
- With a lower monthly payment
Get a Debt Consolidation Loan in Canada
You can contact various lenders to apply for a debt consolidation loan. The key to getting approved is to communicate that you’ll be able to pay. Note that lenders are usually looking for the following:
- Your monthly expenses and budget to show that you can pay loan payments
- Evidence of enough income to make payments such as pay stubs or pay slips
- Extra layer of security such as having collateral or having a co-signer
Once you have the above, you can apply for a debt consolidation loan from a bank or other lenders. Note that whoever you apply to, they’ll look at your credit score, your employment status, and your debt service ratio because they will want to make sure that you have the capacity to pay off your loan.
During the loan application process, you must make sure that the following are ready:
- Your recent pay stub or any proof of income
- Your recent income tax assessment
- Your current bills and debt statements
- Any document that can prove you have assets (if applicable)
Risks for Debt Consolidation Loans
Understand that getting a debt consolidation loan will only work in your favour if you will use it as a tool to help you pay all your debts. It is not a perfect solution unless you are willing to work with it because it is still a loan that you will have to pay off. What it can do for you is to make paying your debts a bit easier and to save you from a financial crisis due to not being able to afford the high interest rates most loans have.
Some debt consolidation loans require a collateral. That means that you can lose whatever you use as collateral if you are unable to honor the terms of your debt consolidation loan. For this reason, it is best to seek the help of loan and mortgage professionals if you want to get a debt consolidation loan. Contact us at Mortgage Central Canada if you have questions or need assistance getting a loan.