Debt consolidation is one of those terms that Canadians have a lot of confusion about. You’ll learn everything including the answers to common questions like: In simple English, debt consolidation involves taking out one big loan to pay off many small loans. But if you take out a ,000 student loan, you will get a better interest rate. By the end of this short guide, you’ll be a debt consolidation pro! For example, if you buy a ,000 TV from a major retailer on credit, they will charge you a very high interest rate.I will make sure you get a personal response to your question.
But here are a few advantages and disadvantages to debt consolidation.
The interest rate charged by a financial institution for a personal loan is usually lower than the rate charged for a credit card.
Unfortunately, it’s much harder to get a consolidation loan if you have bad credit.
Creditors use your credit scores and payment history to determine risk.
And debtors with property such as a home or car may get a lower rate through a secured loan using their asset as collateral.
Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest.
As a result, you will save money on interest payments.
This has many benefits: As long as you follow the terms of your consolidation loan and make your payments on time, your credit rating should not be negatively affected.
The key benefits of debt consolidation are: The basic way debt consolidation works is to combine your smaller loans into a larger loan with the goal of getting a lower interest rate.
However, you can also use your existing assets (such as your home) to have even more leverage with creditors.
The big point to realize is that debt consolidation is about lowering your interest rate.