What is Debt Consolidation?
Debt consolidation is when you take out a loan, typically from a financial institution to pay off debts from creditors, such as credit cards Canada debt. Not all debt can be consolidated, for example you cannot consolidate your mortgage loan. Find out from your financial institution what debts can be consolidated.
What is the Benefit for Consolidating Credit Card Debt?
There are many benefits; reducing the amount paid out per month, better interest rate, pay smaller payments over a longer period of time, paying one creditor as opposed to many and finally, if you are just starting to have difficulties paying creditors, this will give you some relief and allow you to keep a good credit rating.
What are the Disadvantages Consolidating Credit Card Debt
If you get the loan and then start to utilize your old credit, you risk being in worse position as now you have new debt, plus an old debt loan. Make sure after you get the loan, you do not access your old credit. Some financial institutions will close your credit accounts to make sure that you don’t increase your debts while paying off the consolidation loan. Financial institutions are not as flexible with payments as your creditors if you run into financial difficulties, so make sure you talk to your financial institution’s advisor about what if.