Well you are not alone!

After holiday festivities and spendings, receiving your first credit card bills in January can be frightening. It’s the same for the majority of people and they’re in the same boat as you. However, a new year can be an excellent opportunity to restart your financial plans and goals. Going debt-free could be on the top of that list.

Considering Debt Consolidation?

Debt consolidation is actually refinancing or taking on a new loan to pay off loans and liabilities that allows you to pay off other debts rolling over to one lender. You borrow enough money to pay off all your current debts and owe money to just one lender. Below are some options for Debt Consolidation.

Do’s of Debt Consolidation Loan:

• Make sure any savings are not wiped out by fees and charges
• You can afford to keep up payments until the loan is repaid
• You use it as an opportunity to cut your spending and get back on track
• You end up paying less interest than you were paying before and the total amount payable is less as technically it could be more if you repay over a longer period.
• Before you choose a debt consolidation loan, plan ahead about possible interruptions as if anything that might happen in the future which could stop you from keeping up with repayments. What if interest rates go up, or you fall sick, possible family changes or lose your job?
• If you can’t stop spending on credit cards, for example, because you’re using them to pay household bills, this is a sign of cash flow problems and keep compiling debt.
• You should get free advice before taking out a debt consolidation loan. shop around using comparison websites to find the best deal to get advice before you make a final decision. There might be better ways to clear your debts that you haven’t thought about.

Don'ts of Debt Consolidation:

It doesn’t make sense if:

• New loan payment is too big and you can’t afford the new loan payments within your current income
• New debt consolidation loan doesn’t pay off all your debts.
• End up paying more overall if the monthly repayment is higher or the term of the agreement being longer than other debts you previously had.

Consumer proposal:

A consumer proposal is another option of making one payment for all your unsecured debts interest-free.

Advantages of a consumer proposal

• You may be able to settle your debt based on what you can afford, not what creditors are demanding.
• A consumer proposal can stop all creditor actions, including collection calls and wage garnishees.
• A legal agreement between you and your creditors into the settlement, even if they don’t all agree
• Freeze all interest charges immediately.
• Make one monthly payment, with up to 5 years to pay.
• Unlike bankruptcy, a consumer proposal doesn’t involve your assets or other personal belongings.

Disadvantages of a Consumer Proposal:

• You require creditor’s approval, the ones hold half your debts.
• Failure of consumer proposal agreement may result due to missing payments.
• Consumer proposal appears on your credit report, negatively impacting credit.

Debt Management Program:

Another option to consolidate your credit card debt is by using a debt management program into one monthly payment. A non-profit credit counseling services deal with credit card debt with a debt management programme whereas licensed insolvency trustee can also help.

Advantages of Debt Management program:

• Reduction of interest rates.
• Just one monthly payment to all credit card bills.
• Pay off debt faster.
• Possibility of quick credit repair.

Disadvantages of Debt Management Program:

• Administrative Fee added to the actual proposal
• Some creditors may not agree
• Negatively impacts your credit score
• Only credit card debts included thus leaving all other debts such as tax arrears.

Home Equity Loan to consolidate your debts:

Another way to consolidate your debts is by combining them with your mortgage. It is important to make sure debt consolidation loans don't put your home at risk.

Converting your unsecured credit cards, bank line of credit, or store card balance to a mortgage or secured equity line of credit means involving and risking your biggest asset if the installment is too high or high interest.

Advantages of a Home Equity loan:

• Same interest as a mortgage on your credit cards or bank loans
• Longer amortization of the payment ease for the majority of individuals.
• One combined payment with a mortgage so no more paying several bills on different dates of the month.
• Best when you have a lot of equity in the house.

Disadvantages of Home Equity Loan:

• You may have to pay a Home Equity loan consolidation fee.
• Losing equity in your home therefore selling the home may not be beneficial in the near future.
• Nothing is without disadvantages, the same is for a home equity loan for paying off your unsecured loans and debts using your assets as collateral.
• No matter what kind it is still another kind of debt and not necessary to make your financial issues go away.
• A home equity loan is still a debt using collateral against your family's biggest asset, failure of which may result in losing your home that is why it is really important that you consult with a professional before deciding on any of the options to manage your debts.

All of these options provide ways to reduce your debt and pay off debts therefore each situation could be unique and different.

For the same reason we listen to your situation with empathy and show you your options as per your own unique situation.

We offer free professional consultation at Charles Advisory Services Inc. Book your confidential personal consultation by calling us at 416-486-9660 or contact us here.