Debt consolidation combines all your unsecured debts under a single loan, generally from a financial institution and allows to repay all your creditors at once. You will now have one single loan instead of having multiple debts with different creditors. In addition to streamlining all your debts under one single repayment plan, you also have one single loan at lower interest rate instead of having different loan accounts at different interest charges. You must ask your financial institution to offer you a loan amount that is equivalent to all the outstanding debts that are currently due. The debt consolidation loan company will settle all your debts with different creditors and in return, you just have to stick to one repayment plan with that company.
People interested in debt consolidation in Canada should remember some points before talking to the debt consolidation company for a lower repayment plan.
Make a list of all the outstanding debts that you owe to different creditors and know the total balance. If you have forgotten some accounts that were not included in the program, you can always add them later. However, if you have the complete creditors information, it is easier for the loan officer to analyze your monthly repayment plan.
If you find the interest rate is too high on the debt consolidation loan offered to you, don’t hesitate to shop with other companies and negotiate for a better interest rate. Be aware that when you are shopping with more than three different loan companies, their will be more number of inquiries on your credit report and it will have a negative influence on your credit scores.
Before entering into any contract with a debt consolidation loan company, review the terms and conditions thoroughly otherwise you will end up paying more in fees than what you had expected before signing the contract. Review the loan period, interest rate, special terms, fees, etc. before entering into an agreement.
Once the loan has been granted, the debt consolidation company will pay off all the outstanding debts to your creditors. When you are in the repayment plan, the credit accounts that you have included in the program will be closed so that you don’t accumulate more debts when you are in the program. Just make sure that you stick to the repayment plan with your debt consolidation company and get debt free.
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