Debt – the dreaded D-word. While some debt is not a bad thing having a lot of it can certainly be very problematic and limiting in many ways. If you have been trying to pay off your debt, yet not been very successful, this is likely to lead you to search for an effective debt-relief solution.
One of the debt-relief solutions that has been known to come to the defence of many Canadians each year, is debt consolidation. Since debt consolidation enables borrowers to combine a variety of different debts into one loan, with one single payment, it can often be the effective debt-solution that many individuals have in fact been looking for.
With that being said, while it’s true that consolidating your debt can be a viable option for you, it is still best to learn a bit more about it and find out if it is actually the most beneficial course of action for you.
Here are 3 signs that debt consolidation may be right for you.
1) If You Have High Interest Loans
If, as well as having a lot of debt, you also have more than one high interest loans you are paying, then debt consolidation could be right for you.
An example of high interest loans you may be carrying could include significant credit card debt. Since credit cards often have relatively high interest rates, this could be severely contributing to your debt – not to mention your lack of ability to pay it off.
With a consolidation loan, you can combine your debt into one low interest loan, making it a lot easier to pay off this troubling debt.
Ultimately however, it doesn’t necessarily have to be credit card debt that you will combine, any type of debt you have, such as car loans and other personal loans can also be consolidated.
2) If You Have a Very Poor Credit Score
With a bad credit score, you are less likely to be able to access loan opportunities to the same extend as individuals with good credit. Sometimes even, borrowers with bad credit will be denied the loans they need altogether.
Other times however, in the event bad credit loans are approved, this is also just as likely to be done so at a higher interest rate and less favourable terms overall.
There can be many reasons for poor credit, such as having a high debt-to-income ratio. With a lot of debt as high as this, a bad credit score is also likely to follow. That being said, it is then a good idea to lower your debt load, in order to improve your credit.
In the end, you can improve your credit by taking out a debt consolidation loan, especially if this allows you to reduced your debt at a much more effective rate.
3) If You Can Benefit From Making One Single Payment
Finally, if you are struggling to make payments on multiple monthly loans, then loan consolidation could also be for you. For starters, with more than one loan to pay, not only can this be challenging to keep up with from a financial perspective, it could also mean you might, as a result be more prone to missing payments.
While missing a payment here and there may not seem like a big deal, in actuality it can have a negative impact on your credit. Not only will missing a payment mean your credit score could go down, it also means that your debt is not likely to continue to decrease.
With a debt consolidation loan however, you can combine more than one of these debts into one singular loan. Since you are significantly decreasing the amount of different loan payments you have to make each month, you are then less likely to forgot to make your payments on time.
In the end, a debt consolidation loan can be a much more straightforward method of paying down your debt. If you see yourself in one or more of the above mentioned scenarios, then perhaps consolidating your debt could give you the best chance of ridding yourself of all of that unwanted debt – and as soon as possible too.
Of course, you will need to decide if debt consolidation makes sense to you and your specific financial situation. If you are unsure if it is, then it is suggested that you do your research and also seek out the advice of a professional debt-relief specialist. Because let’s face it . . . bad credit and loads of debt does not HAVE to be a part of your financial future.