Loans for Debt Consolidation

Discover Your Options: Debt Consolidation Loans

You might be in over your head in credit card debt. Maybe, you’ve taken out a personal loan with unaffordable interest. Perhaps, you’re facing any number of adverse financial circumstances requiring you to make continual payments that stretch you thin.

Many people are dealing with at least one of these scenarios. Some of them are faced with all three at once.

Fortunately, multiple lingering payments can become one manageable loan that saves you money as you pay off your debts.

How? By taking out a debt consolidation loan.

Here’s another crucial advantage when you consolidate your debt:

You often get out of debt faster.

What’s important is finding the best debt consolidation loan Canada has to offer you. The content below will teach you about the nature of this money management strategy.

Get the Best Debt Consolidation Loan Rates

During the last ten years, the interest rate for debt consolidation loans has been between 7% and 12% for banks, on average.

With secured loans, other financial institutions charge starting at 14% and 30% for unsecured loans.

In Canada, some institutions are offering as low as 3%. However, such favourable terms are for people with sterling credit scores. Provided you don’t earn a sizeable income, possess collateral (e.g., vehicle, home) and your credit score isn’t perfect, those cushy low rates aren’t feasible.

Look at the less traditional financial institutions that have sprouted up as internet platforms and see what they’re offering. Generally, the lowest POSSIBLE rate might be appealing. But you’ll still likely find yourself with an APR of around 30% if you need an unsecured loan.

Benefits of a Debt Consolidation Loan

When you go on a consolidation plan, you only have one monthly debt payment on your plate instead of several pesky instalments.

Furthermore, consolidation is usually done at a lower interest rate, therefore saving you a wealth of money in the long run. On top of that, you’ll pay off your debt in a fixed period, usually between 2 and 5 years.

Finally, the fees charged for debt consolidation are comparatively minimal.

Debt Consolidation Loans FAQ

Here, we’ll answer some frequently asked questions about debt consolidation loans:

What is a Debt Consolidation Loan?

When banks, credit unions, or finance companies give you the funds to pay off several debts, they’re consolidating them into one lump sum loan.

How do I Get a Debt Consolidation Loan?

First, find an institution where you fit all the requirements as a candidate. If you happen to have adequate collateral, excellent credit, and a 6-figure income, the bank will be a breeze.

Regardless of your circumstances, there is likely an option for you—albeit with a less traditional financial institution. Plenty of online platforms exist now that offer unsecured loans, opening debt consolidation to a broader pool of candidates.

Even if your FICO score is low, there’s likely an institution whose requirements aren’t as stringent willing to approve your application. Of course, the only issue then is ensuring the interest rates and minimum monthly payments are affordable.

Before filling out an application, ensure you have all the nuts and bolts requirements. These include proof of employment, SIN number, personal ID, and bank statements.

What is an Unsecured Debt Consolidation Loan?

These are loans that act as a money management tool.

They allow you to combine your unsecured debt into one lump-sum loan from a single lender. This often expedites your debt relief because of a more favourable interest that’s easier to track and pay.

Where Can I Get A Debt Consolidation Loan?

You can take out debt consolidation loans from traditional financial institutions such as banks. They’re also available at credit unions.

Those without excellent credit, high incomes, or collateral can also get debt consolidation loans from financial companies. Usually, online platforms offer unsecured debt consolidation, meaning you don’t need to provide collateral—instead, paying higher interest.

Will I Get Approved for a Debt Consolidation Loan?

Someone can have completely tanked their credit and still potentially receive a debt consolidation loan if they have a cosigner.

More realistically, however, if your score is in the 600s, it does get a lot harder. There are available platforms out there who will likely approve you, but it’s integral to make sure that the terms make long-term sense.

Are Debt Consolidation Loans Good?

Given that debt consolidation in its purest form is a money management tool, yes, it is a good thing. But not all these loans were made the same, and not all borrowers set themselves up to succeed.

Whether a debt consolidation loan is a good thing comes down to your research, discipline, and how much effort you put into righting your financial ship.