What is a Debt Consolidation Loan?
Debt consolidation is a type of debt restructuring in which you take out a new loan to pay off your current loans. Instead of multiple payments with different creditors, you will only have one monthly payment to worry about. Now you can take control over your credit card bills and pay off your debt effectively.
What are the Benefits?
Debt consolidation can make it easier for you to plan out your finances because you only have to make one debt repayment a month. It can also help you pay off your debt faster because if you maintain your monthly debt payment, you can typically secure a lower interest rate.
What are the Risks?
A risk to debt consolidation could be a premature confidence in your debt situation. You may feel your debt situation is under control, but if you fall back into bad spending habits, you can incur more debts and put yourself at a greater risk.
If you are worried about this, talk to your local Licensed Insolvency Trustee and he or she can come up with a debt repayment plan or recommend credit counseling services to help you pay off your loan effectively.
How do I Apply for a Debt Consolidation Loan?
You can apply for a debt consolidation loan at any financial institution including your local bank, a credit union, or any lender with enough support to finance your loan.
If you go with another lender, make sure to provide your monthly budget and a pay stub to show evidence that your income can cover the loan. A co-signer may be required to guarantee your loan. Other documents you may need to bring with you include:
- Information on assets
- Recent income tax assessments
- Current debt statement
Is Debt Consolidation the Right Solution for Me?
Deciding to take out a debt consolidation loan can be a difficult decision to make, so let us help you with any concerns you may have. Book a free confidential consultation with your local MNP LTD Licensed Insolvency Trustee to discuss how debt consolidation can reduce your loan payments, compare other options, and ultimately resolve your financial challenges.