If you are in financial difficulty and you feel overwhelmed by your debts, several solvency options are available to you. One of the most commonly used methods in Quebec is debt consolidation, which simplifies the repayment of your debts. In this article, Courtier Hypothécaire Québec presents everything you need to know about debt consolidation to help you make the right decision for your financial situation.
What is debt consolidation? Debt consolidation involves merging most unsecured debt into a single loan from a financial institution. It lets you get a single loan rather than paying off multiple debts, but it only applies to unsecured debts, such as credit cards. It therefore simplifies the reimbursement process.
Does debt consolidation affect your credit? Debt consolidation does not affect your credit report because it is a loan granted by a financial institution. However, what can influence your credit rating is how you handle this loan. If you meet the deadlines and ensure that you repay your loan, this will have no impact on your credit.
What are the pros and cons of debt consolidation? Debt consolidation is a solution to remedy over-indebtedness that can be more or less beneficial depending on your financial situation and your current needs.
The benefits of consolidating your debts
Debt consolidation has several advantages:
-One monthly payment instead of several, which makes it easier to manage your finances.
-Negotiation with a single creditor for more peace of mind. Interest rate savings that reduce monthly payments.
-Avoidance of personal bankruptcy.
-Maintenance of your credit rating if you continue to make your payments on time.
-Faster repayment of your consolidation loan than your other unsecured debts.
-The benefits of using a mortgage broker.
Disadvantages to consider
It is important to note that debt consolidation is not always the best solution. It can have various disadvantages, such as:
-Difficulty getting a consolidation loan.
-Total amount to be refunded remains the same.
-Additional costs for consolidation.
-Higher monthly payments since they include all your old unsecured debts.
-Late payments that negatively affect your credit rating.
How does debt consolidation work?
Debt consolidation is a solvency solution for people whose financial situation has gotten out of hand due to poor management of unsecured debt. It allows you to combine these debts into a single loan with more affordable monthly payments. Repaying a single monthly installment without accumulating interest rates from multiple creditors makes it easier to manage finances.
Balance transfer on credit cards
This option is for people who have accumulated a lot of debt on various credit cards. It can be done without the help of a licensed insolvency trustee. Simply transfer the balance from your other cards to a new credit card with a low annual interest rate. You can find several attractive offers if you have a good credit report.
The unsecured debt consolidation loan You can also apply for an unsecured loan from the financial institution of your choice. This money can be used to pay off most of your unsecured debts. It is important to have a good credit score to obtain the desired loan. Once you have paid off your debts, you only have to make one monthly payment to pay off your loan.
Line or line of credit
The line or line of credit generally offers lower interest rates than credit cards. If this line of credit comes from your usual bank, you can also benefit from various advantages such as exemption from opening fees or annual fees. However, this solution requires good use.
Mortgage Value Loan If you want to consolidate your debts and you own a valuable property, you can decide to get
How to get debt consolidation?
If you want to obtain debt consolidation, you must prepare a file to send to different financial institutions. The request is free, but file opening fees may apply.
Financial institutions study your file and examine the important details of your situation in order to assess the risk of granting you a loan:
-History of your jobs
-Stability of your address and sources of income
-Payment history
-Credit rating
-Rate of endettement
-And more.
Here are the important steps to follow if you are considering debt consolidation:
-Make a list of your creditors, debts and monthly payments
-Establish a personalized and realistic budget
-Determine your debt ratio
-Consult your credit report
-Examine the different offers from financial institutions to find the most interesting ones
-Apply by providing the necessary documents to the lender
-Check the institution's proposal and new interest rates
-Read the terms of the contract and negotiate, if necessary, certain points with the lender.
If you manage to find a suitable agreement, you will be able to benefit from the desired consolidation loan to pay off your unsecured debts. You must abide by the terms of the contract and make payments on time to keep your credit rating intact.
The importance of the credit file
All lenders require you to check your credit report before granting you a loan. A credit score of at least 650 is generally required. Some financial institutions even offer quite high interest rates with such a credit score. If your score exceeds 700, you can benefit from better offers and especially from lower rates.
A bad credit rating can lead to a refusal by the lender, who will judge that you are too risky for a loan. That's why it's a good idea to seek the help of a financial advisor who can help you prepare your case and negotiate with creditors to get the best deal possible.
How to quickly improve your credit rating?
How many times can you do debt consolidation?
Your debt consolidation request may be refused by the contacted lender. In this case, you can make new requests. However, be aware that multiple failed attempts will appear on your credit report, making it even harder to get a loan. It is therefore essential to ask the reasons for the refusal and to try to improve your file before trying again.
Mortgage broker services
In situations of financial distress, the mortgage broker is your best ally. Our insolvency experts work in your interest with the aim of helping you solve your problems by finding the solutions
Written by Kenny Bruton Mortgage Broker
