Are you the individual who is worried of paying so many debts? Are you too much stressed of your credit card bills, personal loans and lines of credit? Here is the one solution and that is “
Debt Consolidation”
Well, if you’re a native of Canada and seeking for
debt consolidation in Brampton, Ontario, Edmonton then you must first consider understanding what a debt consolidation really is?
In this article, we’ll also put light on that why debt consolidation is important? There are some essential signs that show you need debt consolidation.
For your reference, we’ve listed top 5 signs that you must definitely have a look on. So let’s dive in.
Defining Debt Consolidation
In layman language, Debt consolidation is defined as that financial strategy in which you take a new loan to pay off other existing loans on lower interest rate. Basically what happens here that you can combine multiple of your debts to a single one.
Here is a real life example to give you more clarity about it.
Debt Consolidation Example:
Scenario: Mike has a personal loan for $10,000 with a 15% interest rate and a car loan of $5000 with an interest rate of 12%.
What can Mike Do? Mike decides to take out a debt consolidation loan for $15,000 at an interest rate of 8%. He’ll simply use this loan to pay off both personal & car loan.
Benefit: Here, Mike takes a wise decision of taking debt consolidation loan and with this new lower interest rate and a single monthly payment; Mike saves huge money on his previous interest.
Why Debt Consolidation is Important?
Following are some points listed that why debt consolidation is important? Let’s take a closer look at the article.
- Improves cash flow
- Simplifies payment
- Reduces financial stress
- Lower interest rates
- Faster debt repayment
5 Signs You Need Debt Consolidation Now
Take control of your multiple debts by applying for debt consolidation now. But here the question arises that how do you know that debt consolidation is important for you?
Individuals in Canada who are seeking for the
debt consolidation in Brampton, Ontario, Edmonton must have an eye on 5 major signs that are essential in debt consolidation.
1. Worried of Multiple Debts
This is the first sign when you are worried of multiple bills like you need to pay your car loan or credit card loan.
Well, managing multiple debts can be overwhelming specifically when each debt has different due dates, payments and interests. It can be very stressful when someone is juggling payments to credit cards.
One scenario can be there like keeping the payment schedule in pending phase that can be result in risk of late fees. So, finding for the debt consolidation in Brampton, Ontario, Edmonton can be right decision for you.
2. Are You Paying High Interest Rates?
Here is the second sign for consolidating your debts is paying more interests on your credit cards or loans. These interest rates can be more crippling.
It becomes harder to reduce the principal debt when someone is paying interest rate as high as 20%.
Here you can imagine that a large portion of your monthly payment goes towards interest which can’t be paid easily. Here, you need debt consolidation.
3. Notice Impact on Your Credit Score
It usually happens that when you miss payments or carry more balances then your credit score can get impacted. Your score is also lowered by a high credit utilization ratio, which makes it more difficult to obtain better financial products or cheaper interest rates.
Your credit score is lowered by late payments and excessive credit utilization, which may restrict your access to certain financial options.
You can establish a disciplined and controllable repayment schedule by combining all of your debts into one loan. Staying current on this payment will assist rebuild your credit score over time, and lower your credit utilization ratio, ultimately boosting your credit profile.
4. Keep on Making Minimum Payments
Making the bare minimum payments on your credit cards or loans might trap you in a vicious cycle that can take years or even decades to get out of debt.
The majority of your payments are applied to interest, with minimal progress made toward the principle amount.
Due to hefty interest, making minimum payments keeps you in debt longer and raises your overall payment amount. Instead of just paying the interest on your loans, you can make more significant principal payments by combining them into a single, lower-interest loan.
This lowers the total amount you owe and speeds up the repayment of your loan.
5. Bankruptcy is not the Solution
Many consumers believe that their only options are bankruptcy or a consumer proposal when their debts become too much to handle.
While these tactics provides sigh of relief, they come with long-term costs such as damage to your credit score and financial future.
Consumer proposals and bankruptcy have major legal and financial ramifications that can negatively impact your credit for years.
When contrasted to bankruptcy, debt consolidation may provide a less extreme option. It enables you to reorganize your debt without negatively affecting your budget or credit. You can take back control of your debt through consolidation without having to deal with the long-term effects of filing for bankruptcy.
Conclusion
In order to take back control of your finances, lessen stress, and pay off debt, debt consolidation may be a helpful option if any of these signs apply to you.
You can move toward financial stability and debt independence by combining all of your loans into a single, reasonable payment with a reduced interest rate. So what’re you waiting for? Talk to our professional credit consultant to get debt consolidation solution