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Houses, cars, businesses, medical bills, school tuition fees? Because our 9-to-5’s might not generate enough for us to pay for these things in cash up front, the best way to get what you need now and pay for it later is by acquiring a loan. If you know how to budget your money and you’re confident in your capability to pay off your monthly amortization, then a loan can be your best friend. But of course, money doesn’t always work the way we anticipate.
Enter debt consolidation programs. According to statistics, the average Canadian owes $1.7 of debt on every $1 that they make. That’s why these debt consolidation programs have become more and more popular throughout the years. What is a debt consolidation program, how can it help you, and how do you qualify? Here’s what you need to know.
A debt consolidation program is a program that you undertake with a for-profit company or a credit counseling agency. They come up with a plan to help you pay off your debt, and consolidate all of the payments into one monthly amount. They coordinate directly with your creditors, and they’ll work to get you better interest rates so you end up paying lower monthly totals.
Your loans stay where they are, and you’ll still have to pay them off. But the agency or company will provide you the payment scheme, will work to reduce the amount you pay, and will make it more feasible for you to complete all of your payments without feeling financially burdened. In exchange, you pay them a fee which serves as their profit.
While they sound similar, debt consolidation programs and debt consolidation loans are two completely different financial services. For the most part, the difference lies in the fact that a consolidation program simply offers you solutions to help ease the payment process and cost. Your loans aren’t eliminated, you still pay for them monthly, and there isn’t any new loan being released.
With a debt consolidation loan, you basically acquire another loan and use that amount to pay for all of your existing debt. What you pay for monthly is the amortization for the new loan. The benefit is that you can argue for a lower interest rate, which can make it easier on the pocket. Plus, if your lender agrees to an extended loan term, then you might be able to stretch out your payment to enjoy lower monthlies.
Just as there are a range of reliable, trustworthy credit counseling companies out there, you should also be wary of groups that might not have your best interest in mind. Make sure you shop around for the right debt consolidation agency to make sure you’re really putting your financial security in good hands.
The first step of the process of planning a program is counselling. During that first meeting, your chosen agency should take the opportunity to explain your debt situation and what might work for your unique case. If during the first meeting, you get a bad feeling about your agent or the agency behind him, then don’t be afraid to shop around. It also doesn’t hurt to read reviews online to find a reliable agency or company that can provide you quality services without putting you at risk of further financial turmoil.
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