Debt Consolidation, Is It for Me?
Before declaring bankruptcy, it is better to evaluate all the options available. Debt consolidation is a popular alternative to personal bankruptcy. It reduces debt without tainting your credit history. A debt consolidation is, however, a solution which is not accessible to all.
What is a Debt Consolidation?
To keep things simple, making a debt consolidation is getting a single loan from a financial institution to pool all debts and thus have only one monthly payment.
Banks General Criteria of Acceptance
Before accepting your debt consolidation application, the bank will check the state of your personal finances. It will rely mainly on the following criteria:
- Having a debt ratio of less than 40%.
- Having a decent credit rating.
- Having a stable job.
- Being able to demonstrate that it is possible to repay the loan while continuing to pay regular bills.
In addition, the bank will often ask:
- That a solvent endorser guarantees the repayment of the loan.
- That you cancel your existing credit cards.
What are the Advantages of Debt Consolidation?
In addition to avoiding bankruptcy, debt consolidation has several advantages, including:
- A generally lower interest rate.
- Simplified financial management with a single monthly payment.
- Maintaining a good credit rating.
Warnings and disadvantages?
- The interest rate (12% or more).
- Does the monthly payment respect your ability to pay?
- There is the risk of continuing to go into debt (new credit cards).
Before opting for a debt consolidation, we invite you to contact us so that we can evaluate your situation. The evaluation is free of charge and completely confidential.
A Debt Consolidation or a Consumer Proposal?
Do you know what is a consumer proposal? A consumer proposal is an offer of repayment made to your creditors that allows you to reduce your debts up to 70%. If debt consolidation is not for you or if your bank declined your application, then the consumer proposal might be your best option!