Getting Into Financial Trouble…
An old saying says there are two certainties in life: death and taxes. To that – in this time of inflation and economic uncertainty – might be added ‘the need for debt assistance in Canada.’
More Canadians than ever are struggling with debt loads. Their stories are everywhere. For some, it is the rising cost of
housing eating into pay cheques. For others, it is the difficulty in paying off student loans when very few post-graduate entry
level jobs pay above minimum. Single parents are struggling to make ends meet.
Soaring food costs. Health issues causing a job loss. And, in a consumer culture, there are some people who fall victim to the
enticement of 24/7 access to shopping via the internet.
Whatever the cause, the need for debt assistance in this Canada has become acute. What has not changed is how difficult it is to pull yourself out of debt once you have fallen into it. The most drastic remedy is declaring personal bankruptcy. That should be seen as a measure only be taken as a last resort because of its long-lasting consequences. A better solution – in both the short and long term – is debt consolidation.
What Exactly is Debt Consolidation?
Essentially, debt consolidation is a simplification of your debt load. Many people who are “in too deep” owe money to a range of creditors – credit cards, student loans, landlords, utilities… the list is endless. And those creditors generally require different schedules of payment, at varying rates of interest. Finances become a confusing juggling act of paying the most pressing debts first, and not surprisingly the whole house of cards can come crashing down.
Debt Consolidation gathers together all the debts and, by uniting the various creditors, establishes a schedule of one payment covering all the debts at one consistent rate of interest. No confusion. No variance in interest rates or ‘payment due’ periods. The business of dealing with debt suddenly becomes vastly clearer. Not necessarily easier financially – because the debts still exist. But now a clear path out of the debt exists.
Pros and Cons of Consolidation
For many people debt consolidation is a workable solution. Foremost on the pro side of the ledger is that fixed interest rate, as well as a defined length of time for payments. That creates another positive: certainty of budgeting. The debtor now knows exactly what is needed to pay debts each month. If you have a good credit rating generally it might be possible to lock the consolidated debt in at a lower rate rather than was attached to some of the previous debts. Debt consolidation can also actually boost a credit rating over time, provided payments are made in full and on time.
The cons? There is a temptation to see this as a quick-fix solution to debts. It is a better way of managing them, but they still need to be paid off. A lower interest rate is possible but not a given. Depending on the length of the consolidated loan, you may be paying more interest over time. There can be some costs association with setting up the consolidated debt, called “origination fees.”
Overall: debt assistance in Canada is possible, though Debt Consolidation – and definitely worth investigating.
