Debt Consolidation Options (MNP 3 Minute Debt Break)

In this installment of the MNP 3 Minute Debt Break, we discuss the Debt Consolidation options that could be right for you. 

If your debt payments have become overwhelming, Consolidation can be the answer. There are numerous ways to consolidate your debt, but generally it involves lumping most or all your balances together into a single affordable payment. Here are just a few Consolidation options that come with their own benefits and also some potential risks.

Balance Transfers - Your bank or credit card provider may offer the opportunity to transfer the balance of one or more debts to a credit card or line of credit at a reduced rate over a set timeframe ­— usually between six months and a year.

Qualifying for a balance transfer typically requires a decent credit score and good borrowing history with the lender. It will also typically involve paying an up-front fee, usually around three percent of the total balance you’re transferring over.

Consolidation Loan - Generally obtained through a bank or private lender, a consolidation loan ­­enables you to combine most or all of your outstanding debts into one affordable monthly payment. It will ideally have a much lower interest rate than you’re currently paying on credit cards, lines of credit and other loans. This reduces both the number and total cost of your monthly debt payments.

Consumer Proposal or Bankruptcy - Bankruptcies and Consumer Proposals are the only two federally legislated options to ‘consolidate’ your debt. They are also the only two options which, provided you meet your responsibilities, offer both legal protection and a clear path to debt freedom. Most debts may be included in a Bankruptcy or Consumer Proposal and these options tend to be the most cost effective for debtors.  

When you’re trapped in the cycle of debt and faced with a range of options, it can be difficult to know which choice is the right one for you. Thankfully, you don’t have to make that decision alone. Licensed Insolvency Trustees will always offer a no obligation Free Confidential Consultation to help you find the best path forward. They are the only debt professionals in Canada who can administer Life-Changing Debt Solutions such as Consumer Proposals and Bankruptcies. However, they also have a legal and ethical duty to explain all your debt reduction options and provide an unbiased opinion about which options you’d benefit from most.

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