You may be in a tough situation with three or more loans to pay off. It can become very difficult, especially if the interest rates on all loans are high. You may be on the loser's side because you don’t make enough money to pay off your debts. People with credit card debts face this problem most often. Not only do they have to pay multiple debts, but their credit card rating may be compromised. Debt consolidation plans can solve these problems by allowing one to apply for a special type of loan. The way the loan works is suggested by its name - it consolidates or compiles all debt into one single debt that requires one rather than multiple monthly payments. The borrower can consolidate several unsecured loans into a single unsecured loan, or into a single secured loan (the consolidation loan is secured by an asset owned by the borrower). Many Canadian banks and financial institutions offer debt consolidation loans.
Advantages of Debt Consolidation Loans
Your debts are consolidated into one payment and you'll be charged less in interest rates compared to the multiple debts you serviced. The consolidated debt you pay is more manageable than credit card debt which is known for particularly high interest rates.
Another advantage is that the lending institution pays off the accumulated debt that you owe to the creditors. You are required to make payments only to the new credit provider. Because it may be difficult to track separate payments, the new creditor performs this task instead. You will breathe with ease knowing the exact date of this single payment.
more important, with just one payment to think of, you can focus your efforts on improving your income. Debt is more manageable now that credit card debt is eliminated. You will be able to save and cover any unexpected expenses if such are incurred.
How to Qualify
In order to qualify for a debt consolidation loan, you need to compile the required documentation. First of all, you have to bring with you a copy of your monthly budget. The potential creditor will examine it to see if you can meet the loan payments. Bear in mind that even with multiple debts out of the way, you will have to keep up paying the new loan. Next, you must have a constant source of income. You either work for an employer or have another source of income. A proof of income is required to guarantee that you will pay off the loan. As a proof of income, you should present recent pay stubs and tax return to the debt consolidation company representative.
Some companies require a co-signer or collateral to ensure that you will pay the loan. You can use your car or house as collateral in order to qualify for debt consolidation.
Applying for Debt Consolidation
Debt consolidation loans are offered by banks, and you may get in touch with a loans service representative. Contact a bank official in advance to make sure you have prepared all required documents. All big banks in Canada as well as most chartered banks offer debt consolidation loans. Just check their terms and go with the ones you find most agreeable.
Category: Payday loans