Being deep in debt is stressful. Debt can make it impossible to have financial freedom and can grow worse if you don’t take action to get a handle on it. People can also need bankruptcy protection because they think have left the issues to long to have many other options. It’s not the only option available and it is important to discuss all of your options with a financial counsellor before making the right decision. Bankruptcy is a last resort for those who are unable to formulate another viable plan. Fortunately, it’s easier than people think to improve their finances with a consolidation loan.
Lower Monthly Payments with a Consolidation
If you have 10 multiple credit cards maxed out, you’re paying 10 monthly payments and 10 different interest rates. Let’s say your credit cards all carry a $1,000 balance with a minimum payment of $45 per month. That’s $450 per month, and less than half of that is going to the balance owed and the rest is interest. If you take out a consolidation loan or a consumer proposal for $10,000 and pay off all those cards, you can potentially lower payments by hundreds of dollars every month.
Lower Interest Rates
Not only does a consolidation loan offer lower monthly payments, it also offers you the benefit of paying less interest. A $10,000 consolidation loan at 7.5 percent interest for 10 years means you are paying $119 per month, of which only $35 per month is interest. This means you will have less to pay off overall. Consumer proposals can often be for far less than you owe and freeze interest so your balance is not constantly creeping upwards.
Pay Off Debt Faster
Consumers get to choose the length of their consolidation loan. Making minimum payments to multiple credit cards can take many years to pay off. A consolidation loan marks an end date, and it helps consumers pay off their debts faster and for less money. Consumer proposal are also for fixed period of time so an end date is always in sight and there are no surprise extra amounts owing.