What is Consolidation?
or debt consolidation
is a procedure followed in order to minimize the debts that a person is bound with. The motive of this is to replace several high interest
loans or debts with one single debt having a minimum interest rate. For example, say you owe a sum of money to four different credit card companies
. You can obtain a loan from another financial institution to pay back the four credit cards. Now your debts are consolidated into one financial institution, where you will have to make one single payment each month. This procedure is quite common nowadays in several countries including Canada.
The advantages of debt consolidation are many. Life is made much easier and convenient when you only have one loan to clear off. Cash budgeting becomes easier as you can now expect only one monthly statement whose balance can be well predicted. Debt consolidation loans
loans are usually of low interest
rates compared to the massive rates charged by credit card companies. The reduction in interest rate is one of greatest advantages of this procedure. Such loans also have extended terms which reduce the amount to be paid each month.
So, how does one go about obtaining a debt consolidation loan loan in Canada? The answer is simpler than it sounds. All you need to do is approach a Canadian bank or any lender and prove to them that you have the sufficient resources to repay their loan in the stipulated time. With the help of certain documents, you can easily convince them the same. It would be helpful to show your monthly budget, depicting that there is a provision for repayment of the loan. Your salary slips or job acceptance letter should speak of the fact that you have the necessary income to supplement the loan installments. Nothing is more convincing than a security (whether moveable or no moveable), or a co-signer to prove your capability of repaying the consolidation loan. In Canada, oneís credit number plays a vital role in getting consolidation loans. It is impossible to expect an exceptional credit rating while in the need of a consolidation loan. However, it has to be an acceptable number to gain the lenderís trust.
In past years, this was nearly impossible. The only way out was by obtaining a second mortgage
loan at outrageous interest rates to the tune of 19%. The popularity of this is so high now that you will be able to pull out equity from your home at exceptional interest rates that will save you at least 17% a month on interest. High interests of credit cards and debts can be avoided with the help of such a loan.
After succeeding in clearing all your debts with the help of a consolidation loan, close down all your credit cards until you clear the loan. Even though your loans are now made into one, the monthly payment will be quite high as it sums up all your loans. You have to make it a point to meet this payment every month to maintain your credit score