debt consolidation loan

Debt Consolidation Loan for Debt Management – Where to Start?

When you were a kid, did you ever experience difficulty sleeping because you thought there was something, maybe a monster, under the bed or in the closet? Living with debt can produce a similar sense of unease and can create difficulties sleeping. When you make the decision to get some debt help you have taken a big step towards the goal of managing your debt and hopefully eliminating it.

The first place to start is by putting some thought into what you need to spend each month on your living expenses. Also, take an inventory as to what your assets are and what they are worth. Finally, make a list of your debts, how much is owed and what the interest rates are. After that, we always recommend that you visit your bank or credit union and enquire whether you can obtain a debt consolidation loan. A debt consolidation loan is a practical debt management tool which can potentially squish all of your unsecured debt into one loan. This has practical benefits such as lowering your overall interest rate and reducing the number of different payments that you have to make. If done soon enough, it can help you avoid bankruptcy and provide you with a path to follow to get out of debt.

Some things to watch out for with a debt consolidation loan is that the interest rate is lower on average than the interest rate on your current debt and that the monthly payment will allow some breathing room each month. Therefore, in our experience, the only practical place to obtain debt help via a consolidation loan is at your bank or credit union.

Unfortunately, it can sometimes be difficult to qualify for a debt consolidation loan due to your credit score, income level or the amount of assets you have. At that time you may be referred to the Credit Counselling Society of BC which can be helpful with the services they offer.

If your debt monster is still too big to handle then you should consider some federal solutions that are available to Canadians from coast to coast. Licensed Insolvency Trustees (LITs) are licensed and regulated by the Federal Government and are the only debt professionals able to administer Consumer Proposals (offers to your creditors) and assignments into bankruptcy. Both of these options provide a legal stay of proceedings which will prevent unsecured creditors from pressuring you, even income tax debt! Creditors are then not allowed to garnish your income and are not allowed to collect from you. LITs are also required to provide you with debt counselling so that you can learn from the past and acquire new skills for dealing with finances and credit in the future.

While some of these terms may sound intimidating make an appointment and ask questions! We offer a free initial appointment where we will go over your situation and explain how the different options work. In our experience, once you find out the details, financial stress will leave your life and so will the monster in the closet! Why not make that first appointment, it’s free!

Derek L. Chase, CPA, CA, LIT

Being able to offer debt help assistance to individuals and corporations on a more intimate basis was a driving force in completing a “second CPA” by becoming licensed by the Federal Government as a Licensed Insolvency Trustee (previously Trustee in Bankruptcy) in 1997. It is extremely satisfying to be able to witness lives change for the positive due to a restructuring of financial affairs.