Debt can be a crippling situation; you work hard, long days to pay off your debt, but you’ve hardly made a dent in your outstanding balances. Debt consolidation is a strategy of paying off your debt and forging a lifestyle that will keep you from reaccumulating debt.
If you need a debt consolidation loan, you probably have found yourself in a situation where you have multiple debts, and the interest rates are beginning to become too expensive to manage. Thousands of Canadians are currently living in situations where they are struggling to provide food, clothing and shelter for themselves and their families because they are using all their income on pre-existing debts.
Debt consolidation can be a confusing financial strategy because of the complex nature of being indebted to multiple loaners from different companies or banks. Different loans come with varying rates of interest making it impossible to connect loans and pay them off together; therefore, a consolidation loan requires you to take out a brand new -significantly larger- loan and then use that money to subsidize your smaller loans.
Debt consolidation is a financial payback strategy that is used by individuals for personal and commercial purposes; debt can affect everyone regardless of their occupation, education and background. Individuals that are struggling to pay off student loans, mortgage payments, car loans, or payday loans often need to consolidate their debt. Although this route is not always the right choice for certain individuals, here are a couple of reasons why it may be necessary:
You Have Multiple Credit Cards with Outstanding Balances
Increasing your credit limit on your credit card can be lucrative if you are striving for a low credit usage rate. However, trouble may arise when you begin putting all your expenses on a single card, and you are unable to pay it back. Individuals may apply for a second, third or fourth credit card to help pay off their other credit cards. Credit card debt is an ideal situation to use debt consolidation as a financial solution because you can then make one payment that will be used to pay off your outstanding fees.
When you have outstanding debts, you work to pay off your bills. You may find difficulty trying to pay for necessities such as groceries, clothing, or gasoline for your vehicle. If you don’t make enough to pay off your bills and have available funds for personal and emergency reasons, debt consolidation will help improve your cash flow and improve your savings as well as prevent you from using your credit card for every purchase.
Debt consolidation is not a permanent fix for an ongoing issue. Debt consolidation should be used as a resource to help provide you with funds so that you can work towards working your way out of debt. If you choose debt consolidation as a financial strategy, formulate a budget plan and stick to it; you will find yourself out of your current financial woes and help build a stronger credit score.