How It Works: Debt Consolidation

An individual who has several unsecured debts may consider debt consolidation Ottawa. This process is done through combining multiple debts into one monthly payment. Credit counseling agencies are designed to guide debtors through this process.

There are many benefits to consolidation. First, debtors are expected to make only one monthly payment. This payment is usually lower and more affordable than previous payments they have had. Collateralizing loans can reduce the interest rates because the risk of the lender is low. Most fees will be lowered as well. Fees added because of late and missed payments are annulled.

An individual interested in this process should begin by doing research on a counseling agency. Most agencies are non-profit and have a staff of trustworthy, trained and certified counselors. After choosing an agency to work with, call or visit to speak with a counselor. This professional will work with creditors to negotiate a plan that fits your needs. Usually the individual will pay the creditor what is owed through the agency. In addition to consolidation assistance, many of these agencies offer resources on money management and budgeting, so that financial problems can be avoided in the future.

Though financial woes can be troublesome, there are many options for reestablishing finances. Consolidation, though a beneficial process, is not for everyone. Ideal candidates for this method owe a large amount of money in unsecured debt, usually from medical bills or credit cards, and have trouble making their payments in full and on time. Some people use their home as a collateral asset. This can significantly lower the monthly payments and accelerate the paying off process.

There are other options for settling these financial issues. Some common options: debt settlement, credit counseling and personal bankruptcy. Each method has its advantages and disadvantages. An individual should seek professional advice before investing in any specific method.

Consolidation and debt settlement are not the same. The former lumps all bills into one, low bill. The latter negotiates a reduction in the overall amount of money owed. Counselors should be able to guide you towards the option that makes the most sense for you.

In recent years, there has been some concern over this process. Officials are worried that too many people are combining their unsecured debts into secured debt and listing their homes as collateral. Though this is legal and can make monthly payments significantly lower, the total amount of money repaid is usually very high because of the long duration of the loan. Some say that this process only handles the bills but not the root of the problem.

It is not usually recommended, but consolidation can be done without the assistance of a credit-counseling agency. The pros and cons that come with going with the process alone are worth considering. Though individuals can save money going about it this way, they may also struggle to negotiate with creditors. A person doing the process on their own may start by applying for a personal loan, transferring their credit card balance to a low-interest credit card or taking out a home equity loan.

To help get your finances back on track consider the services provided by InCharge Canada. Their debt help Toronto and debt settlement Ottawa services can provide the right plan and education to help you reach your goals.