Consider debt consolidation if you have taken debt and cannot manage it. It may help you manage the debt. Review the available options. Know all the factors and aspects of consolidation before you apply for a loan. Compare the loans from different providers and choose the best option. If you live in Canada, find lenders who offer debt consolidation loan Canada at attractive rates. Let’s learn about this topic in detail in this blog.
What Is Debt Consolidation?
Debt consolidation is when you get a new loan and use it to make payments for existing loans. In other words, you finish the debt with a new loan. You can also consolidate a credit card debt by applying for a new credit card. Use it to make payments for the existing credit card loans. In other words, you take a new loan to pay off the other loans. This helps you tackle multiple debts.
Common Reasons To Consolidate Your Debt
There are some reasons why people prefer debt consolidation. Let’s discuss these reasons in the section below.
- Easy To Handle
Debt consolidation helps make the payment for a debt easy and hassle-free. Apart from this, you have to deal with a single debt. It is better than having multiple loans. Most importantly, you make monthly payments towards one creditor instead of several. It helps you make timely payments for the debts and not default on them. You also save money on this.
- Pay Less Interest
You have to pay less interest on a single consolidated debt than on multiple loans. It helps reduce the deficit and get rid of it forever.
- Improves Your Credit Score
Debt consolidation helps in improving your credit score. The thing to note is that initially, the score can be reduced due to a hard inquiry on your credit. But, the credit score does increase after some time. If you make timely repayments, you may have a high credit score.
Is Debt Consolidation Right For You
Debt consolidation is a good option for paying off the existing debts if your credit score is good. You may apply for a personal loan in this case. Consider the benefits of personal loans and apply for them. If your credit score is above 670, you can get a loan with a low interest rate. Consolidating the debt is a good idea if you have loans with high interest rates. You may be eligible to get a loan at a lower rate. Taking a personal loan for consolidation helps you set a repayment plan.
It is good to change spending habits to maintain a sound financial life. There are some situations in which debt consolidation may not give favorable results. If you continue to spend more money and take more loans, taking another loan can create a problem for you.
Young adults should know the ways of managing their finances well. People with poor credit scores may have to pay more interest for a loan that they consolidate. Also, consolidation may not be a good idea if you have a fair credit score, as you have to pay more interest. Apply for consolidation only if you can repay the loan within a year.
Methods Of Debt Consolidation
There are different methods by which you can pay off existing debts with another loan you take. Let’s know the ways of debt consolidation.
- Take a personal loan and use the money to pay existing loans of smaller amounts.
- Apply for a new credit card. The cards with a high limit are the best. Use this credit card to borrow money and pay off existing loans.
- Apply for home equity loans and use the money to make payments for older debts.
- Get approval for a line of credit from your bank. Alternatively, get a line of credit from a credit union.
- Apply for a debt consolidation loan in a bank, credit union, or finance company.
- Apply for a debt repayment program that consolidates multiple loans into a single debt.
How Debt Consolidation Loan Works?
People take loans for education, a car, a house, personal reasons, or other needs. The interest on multiple loans can become too much. However, many ways of managing debts include credit card refinancing and debt consolidation loans.
A debt consolidation loan Canada combines the existing and multiple loans into a new and single loan. It involves borrowing money and using it to pay off other loans you have. This closes the loans that you have paid off entirely. After that, you have to make payment only for the new loan.
A consolidated loan is usually better as its interest rate is comparatively less. You don’t have to pay more interest for a single loan than the interest charged on multiple loans. It is best to apply for a consolidation loan of sufficient amount to pay the other loans you want to finish off. If the lender approves the loan, use it to repay the money you owe to creditors. Alternatively, you can get the amount in your bank account. Pay off the older loans with this money. Once this is done, you only need to pay off the consolidated loan.
How To Find The Right Debt Consolidation Loan Canada
- First, check the approval requirements of different lenders. Enquire how much credit score a lender needs for approving a debt consolidation loan. Increase the chances of loan approval by a lender if you comply with their terms and conditions.
- After that, check the interest rate or APR of lenders. Getting a quote directly from a loan provider is better than the interest rates they display in advertisements.
- Know the charges of lenders, including the late fee and prepayment penalty. Also, you need to check if the lender has any origination charges. Decide to take a loan based on the fees they ask.
- Analyze the amount of debt you plan to take and then consolidate the loan. The debt consolidation loan Canada providers have certain restrictions on the loan they offer based on the loan amount.
- Learn about the loan repayment options you want to take to consolidate debts. Take the loan for a longer time in case your amount is significant. It will make the monthly installment smaller and more manageable than a short loan term.
Advantages And Disadvantages Of A Debt Consolidation Loan Canada
Before applying, you must know several pros and cons of taking a debt consolidation loan in Canada. Let’s learn about this in the section below.
It is easy to manage the budget with a debt consolidation loan Canada as you will have a single loan to pay rather than having multiple loan payments. Tracking the money becomes more straightforward as you have to monitor one loan. It makes you stress-free.
- You must spend less monthly on consolidated debt instead of paying for multiple loans. It helps in saving money.
- Getting a debt consolidation loan Canada is the best way to get rid of debts faster. Also, you can repay the loan sooner with consolidation if you have a large credit card loan.
- You must also pay less if the loan’s interest rate is lower. Consider applying for a credit card that has a zero percent APR. Borrow money from a credit card to consolidate your debts.
- Consider consolidating when your loans are past their due date, as it gives you additional time to pay them off. It also converts past-due loans into current loans.
- There may be some extra charges for consolidating debts, and that may include paying origination fees. Apart from this, there are additional charges for balance transfers.
- There is a high interest rate on a debt consolidation loan in Canada. So, you may pay more interest.
- You may lose collateral if you take a secured consolidation loan. It may pose a risk to the assets you submit as collateral to the lender.
- There is a late payment fee if a borrower fails to pay a consolidated loan. It can also create a problem if you need more money to pay the loan.
- People with a low credit score may need help to get a debt consolidation loan in Canada from lenders. It may especially create a problem in getting a new credit card.
Debt Consolidation Loan Canada Services
Some lenders offer outstanding consolidation loans in Canada. Let’s discuss them in the sections below. We will explain the features of the loans along with their pros and cons.
1. Loans Canada Debt Consolidation Loan Canada
If you need a better credit score, this is the best debt consolidation loan in Canada for you. The loan is also suitable for people who have a fair score. There are no charges for using the platform of Loans Canada lender. Besides this, the loan application takes a short time to fill up. You can do it within 10 minutes. Choose a lender who suits your loan needs the best.
They charge you an APR of 6.99-46.96%. The lender offers a $300-$50,000 loan for 4-60 months. A debt consolidation loan in Canada may be of 2 types – secured or unsecured. You must meet the eligibility criteria. Most importantly, having a steady and regular income to qualify for the loan would be best. You get a loan even if your credit score is poor. Loans Canada offers debt consolidation loans across the whole of Canada.
- You get financing within one to two days.
- You get a matching lender within a few minutes of your search.
- There is no direct lender on this platform.
- The interest rate is very high if you have a bad credit score.
- There are many scams with unauthorised scammers pretending to be from Loans Canada.
2. Spring Financial Debt Consolidation Loan Canada
It is an established lender that focuses more on offering unsecured loans. You may use this loan to consolidate your debt. Spring Financial loan is best suited for people who want speedy approval and funding but have a low credit score. Their APR is 9.99-46.96%. Also, they offer a debt consolidation loan for$500-$35,000 for 6-60 months. You can get a secured loan from this lender. Alternatively, you may apply for an unsecured loan.
There are some eligibility requirements for loans from Spring. Your monthly income should be at least $1,800. Also, you should have employment or a job for over three months. The lender offers a loan even if your credit score is terrible. The debt consolidation loan is available throughout Canada.
- The application process is easy.
- The lender has a good experience in business.
- The loan amount is flexible.
- You have to pay high interest if your credit score needs to improve.
3. Lendful Debt Consolidation Loan Canada
This loan provider offers consolidated loans at a 9.9% rate. You need a credit score of at least 600 to qualify for the offer. The required credit score for residents of Alberta and Quebec is 650. You can get a $5,000-$35,000 loan for 3-5 years from Lendful. They offer an unsecured loan. You need to have a credit history for a certain period of up to 3 or more years. Borrowers who have a regular income can qualify for the loan quickly. The APR is 2.99-46.99%. You can repay the loan in a short or long period.
- The interest rate is reasonable.
- Flexible loan amounts.
- People under 19 years of age can’t get a loan.
4. SkyCap Financial Debt Consolidation Loan Canada
Next, let’s talk about SkyCap debt consolidation loan Canada. The debt consolidation loan from this lender is outstanding. They offer loans with flexible payment schedules. You can choose the day for repayment and align it with your payday. SkyCap does not emphasize your credit score. Instead of that, it analyses the credit history and some other factors. They include your employment and job status. They also check your income.
- Friendly customer service.
- The starting rate is less than that of other lenders.
- There are no charges for repayment.
- The interest rate is high in case your credit score is less.
- Their interest rate is higher as compared to traditional lenders.
- The loan may not have a positive impact on your credit score.
5. Loan Connect Debt Consolidation Loan Canada
The online broker has a vast number of lenders. They offer the best debt consolidation loans for people who have bad credit. Consider the loan in case you have a high credit score. You get multiple offers of loans from Loan Connect. Their APR is 5.99-46.96%. The lender offers a consolidation loan of $500-$35,000 for 1-5 years. You can get a secured or unsecured loan. You are eligible for the loan if your debts exceed 60% of your income.
- The process of applying for the loan is easy.
- The lender approves the loan very fast, within five minutes.
- You get financing in one to two days.
- The interest is high in case you have a low credit score.
- You cannot get a loan from a direct lender.
6. Fairstone Debt Consolidation Loan Canada
The lender offers secured debt consolidation loans Canada. Alternatively, you can take an unsecured loan. They provide loans for $500-$50,000 for a 6-120-month period. The APR is 19.99-39.99%. People with a low credit score on their credit card may need help to get a loan.
- You can apply for the loan online.
- You receive the money within one to two days.
- Borrowers may get offers that don’t affect their credit score.
- The lender gives preference to homeowners.
- If you want a secured loan, you must visit their offline office.
7. Go Peer Debt Consolidation Loan Canada
This debt consolidation loan Canada is a peer-based lender through which you can get a debt consolidation loan from other people who live in Canada. You pay interest to lenders directly. The APR is 8.99-34.99%. You can get a $1,000-$35,000 loan for 36-60 months. The loan service offers unsecured loans. There are some eligibility criteria for a loan from Go Peer. Your annual income should be $40,000.
Furthermore, you should not have any payday loan debt on you. Also, your credit score needs to be at least 650. People with a low credit score may need help to get a loan.
- You get an extra 15 days in case of a problem or unexpected life event.
- Borrowers can apply anonymously.
- The lender is safe and secure.
- There are no charges for prepayment.
- The APR rate is high.
- The APR also includes the origination fee.
How To Simplify Repayment For A Debt Consolidation Loan Canada
It is essential to repay a consolidated loan on time. Remember the payment schedules and make every payment on its due date. Following are some ways of repaying a debt consolidation loan you take.
- Apply for a debt management program in Canada that negotiates debt payments with creditors. Take advice from a credit counselor. The debt management program may lower the interest you pay for the loan.
- Take a new consolidation loan that pays off the existing loans.
- If you have a credit card debt, apply for a balance transfer. Apply for a new credit card and transfer the balance to existing cards to finish their obligations.
- Borrow money against home equity. Use the amount to make payments for the existing loans.
- Apply for debt settlement. Negotiate with creditors. Offer a debt settlement plan to them.
- Submit a consumer proposal in which you agree to repay the debt in monthly installments. This method does not consolidate the debt but reduces the debt payments. A bankruptcy trustee manages the consumer proposal.
We have reached the end of the blog on debt consolidation loans Canada. Consolidating the debt is the best solution for paying off multiple loans. It reduces the monthly installments you pay for several loans. You have to pay for a single loan. It becomes easier to handle one loan than loans of diverse types. Consolidation saves you money and extends the debt repayment period further. It also reduces the monthly payments for the loans.
Are debt consolidation loans a good idea?
Debt Consolidation is the best option for people with multiple loans with a high interest. You can get a consolidated loan at a lower interest rate if your credit score is good. This may reduce the interest on your loan.
Do debt consolidation loans hurt your credit?
Initially, the credit score may become less due to a hard inquiry. However, this may be temporary. The score rebounds and becomes normal after some time.
What are the red flags for debt consolidation?
There are some red flags for debt consolidation. Borrowers must be alarmed if a lender asks for an upfront payment. Some lenders may pressure you to act fast, or they may make an unsolicited offer. Consider it as a red flag. Be careful if you are requested to end your contact with creditors or stop making payments for your bills. It is a red flag if the lender does not reveal its terms and conditions or guarantees to lower or forgive your loan.
Is it hard to get a consolidation loan in Canada?
A consolidation loan in Canada is easy if you meet the lender's criteria. Lenders approve the loan if you have a good credit score and your income is good. However, getting loan approval can be challenging for borrowers with bad credit scores. If you have a high debt, the lender may only approve the loan slowly.
Can debt consolidation help with car loans?
Yes, debt consolidation may help with car loans. Most borrowers prefer to buy a car with a loan. Even if your credit score is poor, you can get a car loan without credit. You may consolidate a car loan by taking a new personal loan or a home equity loan. The other options are applying for a line of credit or a new credit card.