What are Consolidation Loans or Debt Consolidation?

They may secure the loan to one of your assets and if you don’t make the payments, they can take the asset (example is your home or vehicle)

There are other multiple  other non-borrowing options to consolidate your debt.

Consolidating debt does not guarantee that you won’t go into debt again. If you have a history of living beyond your means, you might do so again once you feel free of debt. To help avoid this, make yourself a realistic budget and stick to it. Ask us for assistance with your budget. We are not here to tell you how to budget but to walk you through putting together a budget that works for your household. You should also start building an emergency fund that can be used to pay for unexpected expenses, so you don’t have to rely on credit cards.

Result: Consolidation can help you pay debt off, but it will not eliminate the financial habits that got you into trouble in the first place, such as overspending or failing to set aside money for emergencies. You can prevent more debt from accumulating by putting together a budget and keeping track of your spending habits.

Some debt consolidation loans come with fees. These may include:

• Balance transfer fees.
• Loan fees.
• Closing costs.
• Annual or monthly fees.

Before taking out a debt consolidation loan, ask about all fees, including those for making late payments or paying your loan off early. Depending on the lender that you choose, these fees could be hundreds if not thousands of dollars. While paying these fees may still be worth it, you’ll want to include them in deciding if debt consolidation makes sense for you. Do not rush into signing the loan get all the information and make an informed decision.

Result: Do you research and read the fine print carefully when considering debt consolidation loans to make sure you understand their full costs.

Your debt consolidation loan could come at a higher rate than what you currently pay on your debts. This could happen for a variety of reasons, including your current credit score.

Consumers consolidating debt get an interest rate based on their credit rating. The more challenged the consumer, the higher the cost of credit.

Additional reasons you might pay more in interest include the loan amount and the loan term. Extending your loan term could get you a lower monthly payment, but you may end up paying more in interest in the long run.

When you consider debt consolidation, weigh your immediate needs with your long-term goals to find the best solution.  Make an informed decision prior to signing the agreement.

Result: Consolidation does not always end up reducing the interest rate on your debt, particularly if your credit score is less than ideal.

If you miss one of your monthly loan payments, you’ll likely have to pay a late payment fee. In addition, if a payment is returned due to insufficient funds, some lenders will charge you a returned payment fee. These fees can greatly increase your borrowing costs.

Lenders typically report a late payment to the credit bureaus after it becomes 30 days past due, your credit score can suffer serious damage. This can make it harder for you to qualify for future loans and get the best interest rate.

To reduce your chances of missing a payment, enroll in the lender’s automatic payment program if it has one.

Before you take out a debt consolidation loan, make sure you can afford the monthly payments. Missing a payment can lead to late fees and a lower credit score. Ensure you always have the funds in your account early for the payment.

Have you been denied a consolidation loan?  Call Day Group and ask if you qualify for a  Consumer proposal one monthly payment with no interest this will include all your unsecured debts (credit cards, CRA, unsecured line of credits).