Obtaining Debt Consolidation Assistance for Poor Credit
When it comes to managing multiple debts with a low credit score, the pressure can be intense. Fortunately, there are several strategies that Canadians with a less than ideal credit rating can use to regain control of their finances. One of the most effective approaches for many is a debt consolidation loan. This guide will discuss how to obtain debt consolidation assistance for poor credit in Canada.
Understanding Debt Consolidation
Debt consolidation typically involves a debt consolidation loan. This is a new loan taken out with the intent to merge all your various debts into one. It includes any unsecured debts such as credit card debts, loans, and lines of credit. The primary advantage of debt consolidation loans is they simplify your overall debts, requiring only one payment each month. This eliminates the need to keep track of multiple creditors and payment due dates.
Debt consolidation loans can also reduce the overall interest rate you pay on your debts, and often provide more favourable payment terms, such as reducing your monthly payments by extending the repayment term. These loans can help you achieve debt relief faster and save money along the way. However, securing a debt consolidation loan with poor credit can be challenging, but there are ways to overcome this.
Why Might You Be Denied a Debt Consolidation Loan?
There are several reasons why lenders might consider you ineligible for a debt consolidation loan. These include:
- Poor credit rating.
- Insufficient credit history.
- Recent application for new credit.
- Lack of collateral, such as assets or home equity.
- High debt levels.
- Insufficient income.
If you have been refused a consolidation loan and urgently need funds, you might consider payday loans. However, numerous other options can help clear your debt in a less harmful manner. Bankruptcy Canada is here to help you with these alternatives.
Steps to Get Debt Consolidation Assistance with Bad Credit
At Bankruptcy Canada, we recommend the following steps to obtain debt consolidation assistance for bad credit:
Review Your Financial Situation
Before committing to a debt consolidation loan, you should first review your financial situation. Check the total amount of debt you have, the associated interest rates, the amount of monthly payment you need to make, and any late fees where relevant. This review will help you understand the extent of your financial difficulties and determine whether a debt consolidation loan is the best debt relief option for you.
Check Eligibility for a Debt Consolidation Loan
While debt consolidation loans can significantly reduce your loan interest rate, you first need to ensure you meet the eligibility criteria. You can do this by reviewing the debt consolidation loan products available in the market and speaking to different lenders and financial institutions to find a loan that suits your needs.
Shopping around will help you find the best interest rate and repayment terms for your budget and financial goals. You can use online loan comparison websites to quickly compare a range of loans, saving time and identifying specialized lenders open to lending to Canadians with poor credit scores.
Compare Debt Consolidation Loan Costs
Getting approved for a debt consolidation loan does not necessarily mean it is the best debt relief option for you. The loan must meet a few key criteria:
- It should be sufficient to pay off all your existing debts.
- It should reduce the amount of interest you pay on your debts.
- It should offer an affordable monthly repayment figure that fits your budget.
Ultimately, the loan should cover your debts and have a lower interest rate.
Increase Your Approval Chances
Securing a debt consolidation loan with bad credit can be difficult, but it is not impossible. You can increase your chances of approval by:
- Finding a loan cosigner such as a friend or family member.
- Securing your loan with home equity where applicable.
However, both options carry risks. You should only use the debt consolidation loan to pay off the debts you have. Close any other credit accounts and do not apply for further credit until your current debts are paid off. Establish a repayment plan so you know exactly when you will be debt-free.
Consider consulting a reputable Licensed Insolvency Trustee if you are unsure of how to become debt-free – they can help you create a budget from scratch.
Alternative Debt Relief Forms
If securing a debt consolidation loan due to poor credit is difficult, you may want to explore alternative debt relief options. These could include:
- A secured loan. Secured loans require collateral as a security deposit for lenders. This might be a vehicle or property, to increase your chances of loan approval. However, failure to make monthly payments could lead to the seizure of your collateral.
- Borrowing from friends or family. Although not always possible, being honest with your family and friends about your financial challenges could help with a resolution. They may be willing to lend you the funds you need to consolidate your debt. If you choose this option, be clear on your repayment terms to avoid damaging relationships.
- Filing a consumer proposal. A consumer proposal is a legal debt settlement that can reduce your debt by up to 80%. It involves suggesting an affordable monthly payment figure to your creditors. You will work with a Licensed Insolvency Trustee to negotiate this figure with your creditors. If accepted, you will only be committed to making your manageable monthly payments for up to five years. Key advantages of a consumer proposal include keeping your assets and preventing creditors from contacting you. At BankruptcyCanada, we have a 99% acceptance rate on consumer proposals we file.
- Filing bankruptcy. Bankruptcy is the legal process of assigning any non-exempt assets you may have over to your Licensed Insolvency Trustee in exchange for the clearance of your unsecured debts. It is the best way to gain a fresh financial future in Canada. Although many Canadians think that bankruptcy means you lose everything, that is not the case – you can keep a property and a vehicle up to a certain threshold.
If you have poor credit, you may also need support in rebuilding your credit score. If you want to know how to get debt consolidation help for bad credit, book a free consultation with Bankruptcy Canada. Our Licensed Insolvency Trustees are here to help you. We will review your financial circumstances and share the best form of debt relief for you and your circumstances. Reach out today – you owe it to yourself.
