Many times the debts of credit cards and other debts can be about to go out of control and you need to take action to avoid getting into debt more. A common repayment strategy is the consolidation of debts, which is nothing more than approaching a financial institution and, through a new loan, paying all the debts, and then collecting them all with a single payment.

This strategy is not ideal for everyone, it is important to learn about the advantages and disadvantages in order to make the best decision. For this reason, finance watchdogs informs you easily and in detail these points and finance watchdogs is the best option for you

What is Debt Consolidation?

Definition of debt consolidation: The consolidation of debts consists of obtaining a loan to pay other loans and/or credits (credit card, etc.). With the consolidation of debts, you can pay several debts in a single monthly payment. Debt consolidation is just one of the solutions to reduce your debts.

What is the objective of debt consolidation?

The main objective is to get a loan with lower interest rates and lower monthly payments without risking your assets.

Debt consolidation loans are useful for people with high debt interest and who have trouble paying bills each month.

Main advantages of the debt consolidation:

•    Join all your debts in one: Suppose you have five different things, the mortgage on your house, the car loan, a personal loan and some money on two credit cards, you need to be aware of each of these debts and pay 5 receipts every month. With the consolidation of debts, your 5 debts will be consolidated into one, in this way you will need to pay only one receipt each month, which will make it easier to plan and budget your expenses.
•    Reduction of the average interest rate in the total amount: With five different debts, the highest interest rate can be up to 18% and the lowest interest rate can be 3.5%. After consolidation, the consolidated debt can have an interest rate of only 3.5%, so your average interest rate is significantly reduced and with it your overall debt and what you have to pay each month.
•    Debt consolidation loans can reduce the total amount of money you pay monthly, meaning that after consolidation you pay less money in the single monthly payment than you pay now by adding up all your monthly payments.

Disadvantages:

•    If the repayment period is very long you will remain indebted longer and the cost of interest over time can cause you to end up paying more.
•    When having the paid cards there is the temptation to use them again if we do not change our way of life, this can lead us to owe more with the new consolidated credit.
•    If we give as a guarantee our house in consolidation, having repayment problems we can put our property at risk.
•    Consolidating debts can affect your credit score.

Before determining if this strategy is the right one for you, advise yourself professionally to explore all your options. A firm certified by the government to solve debts in Canada is called Licensed Insolvency Trustee, who has the obligation to explore all their options.