Debt consolidation allows you to merge several smaller loans, credit card balances, payday loans, overdraft balances, bills, and debts into one. Note that in reality, it is technically impossible to combine different loans since each loan has its own repayment terms and interest rate. So to consolidate a debt involves getting a new, larger loan and using the money to pay off the smaller loans that you wish to consolidate.There are many sources of loans to do debt consolidation, one of the most popular being debt consolidation loans.
In Canada, you can get the best debt consolidation loan interest rates from banks and credit unions. Lenders set interest rates on a case-by-case basis. Some of the factors affecting interest rates include:
Over the past 10 years, debt consolidation loans have typically attracted an interest rate of between 7% and 12% while finance companies have been charging an average of 14% and more than 30% for secured loans and unsecured loans respectively.
Banks have several minimum requirements that you have to meet to get a debt consolidation loan. These include:
Note you may still get the loan even if you do not fulfill all the requirements. A good co-signer will assist you to secure a loan since he/she will be responsible for clearing the loan if you are unable to.
If you do not qualify for a debt consolidation loan due to such reasons as unavailability of reasonable collateral, there are other options available. Most of these solutions are a little complex and you may want to talk to a Credit Counsellor to know what best works for you. Non-profit Credit Counsellors offer their services free of charge. No matter how desperate or complicated your situation may seem, do not despair – there is a solution for everyone.