Consolidating your debt is a good choice for those who have a satisfactory credit rating and sufficient income to pay back their debt in full. Individuals with higher debt, a lower credit rating or low income should consider pursuing a Consumer Proposal or Bankruptcy.
As this is not a formal legal process, you choose the debts which you would like to pay down with the new consolidation loan.
Depending on how quickly you take action and begin paying off your debt, debt consolidation should have little or no effect on your credit rating. However, late payments, failure to make minimum payments or being sent to collection can negatively affect your credit rating. The longer you wait to repay your outstanding debt, the more your credit rating will be negatively affected.
In order to qualify for debt consolidation, you must have a satisfactory crediting rating and sufficient income to sustain the loan. The financial institution issuing you the loan will conduct an assessment to determine if you meet their criteria.
If debt consolidation isn’t a viable option for you or if you were rejected for a consolidation loan, there are several other options available. It is always best to talk to a professional to find out which solution is right for you.
There may be a fee involved to open a file for your consolidation loan, in addition to regular loan payments.
If you suddenly lose your source of income or are simply unable to pay your consolidated loan, you may need to explore other options such as Bankruptcy or a Consumer Proposal. Speak to a Licensed Insolvency Trustee.
The institution that granted your consolidated loan may cancel any credit cards or close lines of credit you have to make sure that you don’t continue to accumulate debt. This decision is made by financial institution providing the loan.
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