Debt Consolidation in Kelowna
Kelowna, BC Debt Consolidation Services
For many residents of Kelowna, BC debt is an unfortunate but necessary part of day to day life.
While Kelowna is a largely prosperous city, with 49% of workers earning an above-average wage, many citizens experience higher than average debt levels with debt-to-income ratios of up to 150%.
While many residents of this great city are able to manage their debts well, household debt can become a slippery slope and see residents pay off more of their hard-earned money to pay off their debts than is strictly necessary.
Debt can place a chokehold on our cash flow, making it much harder to save and budget.
As such, when unexpected expenses come along our only option is to take on more debts to cover them.
As a result, we find ourselves struggling to keep track of our repayments and interest rates.
Most households are almost certainly paying more in interest than they should.
Let’s take a look at the ways in which consolidating your debts can make them more manageable and help you to live debt-free faster.
How Debt Consolidation can help you to live debt-free
When you have multiple debts from different creditors, it can be very difficult to budget.
And because each debt has a different rate of interest, it’s hard to ascertain just how much of your monthly income gets wasted on paying interest to your creditors.
If you’re only making the minimum repayments on your credit cards, for instance, you’re certainly paying over the odds on interest.
In fact, you could be paying off as little of your principal (the amount you’ve borrowed) as $10 a month.
The average Canadian household wastes an astonishing 7.3% of their monthly income on interest payments alone.
Debt Consolidation helps to make your debts more manageable.
It effectively repays your debts and replaces them with a single new debt with a rate of interest that’s invariably more favourable than the rates on unsecured loans and credit cards.
For instance, most debt consolidation loans have interest rates of around 10% while a credit card will usually have an interest rate anywhere between 19% and 29%.
Because you’re paying less in interest every month you can pay down your debts faster, and get debt-free.
Know your options
When it comes to consolidating your debts, there are a number of options available to you.
The best one for you will depend on how much you owe, how many creditors you have and what kind of credit rating your financial goals require you to have.
Let’s take a closer look…
Debt Consolidation Loans
Debt Consolidation Loans are quick and easy to set up.
And if you have a decent enough credit rating (or some collateral to leverage against the loan) they’re one of the most accessible ways to take control of your debts.
While you will significantly reduce the amount you spend on interest, you may or may not find that the proportion of your income spent on repayments is larger under a Debt Consolidation Loan.
It depends on how much you owe, and to how many creditors.
However, you will be able to pay off your debts in a few short years rather than prolonging them for decades.
Because Debt Consolidation Loans repay your existing debts and replace them with a single new one, this may also improve your credit rating.
That said, we’d advise better budgeting and saving if you want to live debt-free and stop relying on credit.
Debt Management Plans
Those whose credit ratings are not conducive to Debt Consolidation Loans may be able to significantly reduce interest (or have it expunged completely) while also paying off their debts faster.
There are many non-profit and private Credit Counselling services which can help you to set up a Debt Management Plan with your creditors.
This is a voluntary arrangement whereby creditors agree to consolidate debts and reduce interest to make repayments more manageable.
While interest can be reduced or even written off, the principal will always remain the same.
Debt Management plans, however, come with caveats.
They are not appropriate for every debt.
Debts over $15,000 may not be eligible for a plan, and government / CRA debt cannot be enfolded into a Debt management Plan.
Furthermore, the plan will remain on your credit report for up to 3 years after it has been repaid.
Finally, a Consumer Proposal not dissimilar to a Debt Management Plan.
The principal advantage, however, is that it allows you to write off a portion of your principal and ensures that you don’t spend another penny on interest.
In some cases, up to 70-80% of the principal will be forgiven.
You cannot do this on your own, however.
You’ll need a Licensed Insolvency Trustee who can act as your Proposal Administrator.
They will look at your debt, assets and finances to put a proposal together for your creditors.
If at least a 51% majority of them agree to the terms, all your creditors will be legally bound by them.
Unlike a Debt Management Plan which is a voluntary arrangement.
Consumer Proposals can also be used for government debts, Student Loans (as long as they’re over 7 years old) and CRA debt.
A Consumer Proposal typically takes around 3-5 years to pay off, and will remain on your credit report for a further 3 years after it has been settled.
How we can help
Whatever your debts and circumstances, we can work closely with you to find the right debt relief option for your circumstances.
Unlike Credit Counselling services, we can help you explore all of your options and help you to get debt-free faster.
For over 20 years, we’ve helped over 200,000 Canadians from all walks of life to live free of debt and achieve their financial goals.
Want to know more?
Call us today on (877)879-4770 to arrange a risk-free, zero-obligation and completely confidential callback.