Reasons to Consolidate Multiple Debts

by John Stevenson on January 27, 2014

There are different ways to reduce your interest rate or debt load, including consolidation and settlement. Borrowers usually consolidate unsecured debts such as loans and credit cards. There are many reasons why borrowers get into debt, including gambling, underemployment, complicated divorce, and others.

Canadian Debt Consolidation

DCConsolidation is a good option for customers with credit and charge cards. Debt consolidation is one way to reduce interest charges on credit cards and take advantage of 0 percent introductory rates. Some borrowers also choose this method because of the possibility to get deductions. Borrowers save hundreds or thousands of dollars in taxes and interest charges. Borrowers improve their credit scores and are offered loans with attractive terms and rates.

Lower Monthly Payments

Standard consolidation loans are offered by peer to peer lending platforms, credit unions, and banks. Banks also offer home equity loans to customers with poor credit The main benefit is that borrowers get a lower interest rate.  Homeowners borrow against their home equity, and financial institutions take less risk as a result. Home equity lines of credit also offer many benefits, among which flexibility, affordable payments, and lower interest rates. The main advantage is the competitive fixed interest rate. Some borrowers use HELOCs to consolidate credit card debt.

Other Forms of Consolidation

Student loan consolidation is a way to deal with excessive debt. It is a solution for health education assistance loans, subsidized loans, and others. This option is available when you leave school or graduate. An income based repayment plan is one option for recent graduates. The term of the new loan is longer.

Online Tools

Using an online calculator is one way to get a clear picture. You need to enter details such as credit card balances and personal, boat, and other loans. The calculator asks you to enter all outstanding balances and offers a consolidated loan and current debt analysis. For instance, you have a student loan of $1,500 and the interest rate is 8.5 percent. You also have an auto loan with a balance of $1,100, $200 in monthly payments, and 8 percent APR. The online calculator shows important information such as your monthly savings amount and total debt balance. If you choose to use the services of a professional instead, try to find a reputable provider.

If consolidation is not a feasible option, consider alternatives such as formal proposal to your creditors and restructuring. Bankruptcy is a last resort if you exhaust all other options.

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