Certainly not. Debt consolidation services Toronto allows individuals to combine multiple unsecured debt and pay a single monthly payment. Sometimes financial experts or debt counseling agencies recommend consolidation as it can actually help you to rebuild your credit score. Let’s take a look at how debt consolidation works and whether it’s a suitable form of debt relief for you.
Debt consolidation can allow you to clear your credit card debt. It is a form of debt relief that involves transferring all the amounts you owe into a lower interest loan. A debt consolidation loan is normally given at a lower interest because unlike a credit card facility, this one has collateral which is your home. With this type of loan, you can instantly lower your interest payments but at the same time increase your principal payments. This is what allows you to reduce the amount you owe faster and also improve your credit rating. The best part is that you do all this without spending money. In general, debt consolidation can get you free of credit card debt because there are people willing to give you money at lower interest rates than your credit card issuing bank.
How well this works will vary from person to person. First, it is important to know how much you owe, what interest rates are being charged and penalties that you are required to pay up. After determining your options, the next thing you can do is to take out a lower interest loan and use it to pay off the other debts. This can eventually allow you to be free of debt much faster since most of the money will now go towards paying the principal amounts instead of the interest. Debt consolidation also makes you less likely to default because you don’t have too many payments to make every month. As you continue paying your debt, your credit score will improve making it easier for you to quality for financing in future.
Debt settlement Toronto is quite different from taking a consolidation loan. While both options can help you to get free of debt, a consolidation loan has the following features:
One of the factors that will be used to find out if you qualify for a debt consolidation loan is your Loan-To-Value ratio. This is simply calculated by dividing the size of your mortgage by the value of your home. For instance, if you took a mortgage worth $1 million and your home is currently valued at $2 million then the LTV will be 50%. Most institutions accept loan to values of up to 80%. This simply means that your total debt can be as high as 80% of your home’s value.