How to consolidate my debt?

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Thinking about tidying up your debt in Canada? Options include debt consolidation, consumer proposals, or debt management plans. Debt consolidation combines your debts into one monthly bill. Consumer proposals, guided by a Licensed Insolvency Trustee, offer relaxed repayment over 3-5 years—not all trustees can be trusted. Licensed Insolvency Trustees are paid by lenders and creditors, not by Canadians in debt. They may also double bill or charge extra fees. Non-profit creditors provide personalized plans without reducing debt. If you need help making a choice, reach out via phone, text, or live chat with any questions.

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Debt Consolidation Question

How to consolidate my debt? DEBT INSIDERS I have multiple debts and want to combine them into one payment. I want to know how debt consolidation works in Canada.

From: Anonymous Question
Location: Oakville, Ontario (ON)
Category: debt consolidation

Debt Consolidation Answer

Thinking about tidying up your debt situation in Canada? Let’s unpack some options! You’ve got a few paths you could stroll down: a debt consolidation loan, a consumer proposal, or a debt management plan. Here’s the scoop: With a debt consolidation loan, you snag a new loan to round up all those pesky debts into one neat monthly bill, ideally with a lower interest rate. Got a sweet credit score? Excellent—that’ll help! Not feeling the loan? Consider a consumer proposal. This is where a Licensed Insolvency Trustee (LIT) helps rearrange things, so you pay back some of your debts over 3 to 5 years. This could put a pause on those dizzying collection calls and interest. Keep your eyes peeled, though—not all trustees are created equal, so do a little homework! Trustees are funded by lenders and creditors, meaning they don’t work in the best interest of Canadians in debt. They can also double bill or add extra charges.

Or, if you’re craving a personalized touch, a non-profit credit counselor can help you whip up a debt management plan. It won’t slash your debt, but it does make the payments feel less chaotic. Just a heads up to steer clear of new debts during this time—focus on sticking to those payments like glue!

Got your method chosen? Great! Remember, there’s also debt settlement lurking around, though it’s a bit of a wild card with its own set of challenges. Not every creditor will bite, so weigh this option carefully. Before making your decision, give each method a good look-over, considering costs and potential dings to your credit report. Still got questions? Reach out anytime via phone, text, or live chat!

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

To consolidate your debt in Canada, you can consider the following options:

1. Debt Consolidation Loans: This involves taking out a new loan to pay off existing debts, leaving you with one payment to manage. Ensure you understand the terms and interest rates associated with this loan.

2. Debt Management Plans: Work with a credit counseling agency to create a debt management plan, which may involve negotiating lower interest rates with your creditors and combining your payments into one monthly payment.

3. Consumer Proposal: If your debts exceed $1,000 and you can’t afford to pay them back, you can file a consumer proposal through a Licensed Insolvency Trustee. This legally binds your creditors to accept a reduced amount or an extended payment period (Bankruptcy and Insolvency Act, RSC 1985, c 6).

4. Debt Settlement: Involves negotiating with creditors to settle your debts for less than the full amount owed. This may affect your credit score and should be approached with caution.

5. Debt Consolidation Companies: Beware of companies that charge high fees for consolidation services; ensure they are reputable and clarify all terms before proceeding.

Each option has its implications for your credit and financial health. You may want to consult a financial advisor or a Licensed Insolvency Trustee to explore the best option for your circumstances.

From: OSB Helper

Related Questions to How To Consolidate My Debt

Here are the top 5 most frequently asked questions related to debt consolidation in Canada, along with brief answers:

1. What are the best debt consolidation options?

Debt consolidation options include debt consolidation loans, home equity loans or lines of credit, Consumer Proposals, personal bankruptcy, and debt management programs through non-profit credit counselling organizations[1][3][5].

2. Can I get a debt consolidation loan with bad credit?

It is more difficult to qualify for a debt consolidation loan with bad credit, and any approved loans will likely have higher interest rates, but alternatives like debt management programs or Consumer Proposals may be more suitable[1][3][4].

3. How does a Consumer Proposal work for debt consolidation?

A Consumer Proposal is a legal process administered by a Licensed Insolvency Trustee, allowing you to pay a portion of your debts over a maximum of 60 months, with potential to write off a significant portion of your debt and protect you from creditor actions[2][4][5].

4. What is the difference between debt consolidation and debt settlement?

Debt consolidation combines multiple debts into one payment, often with a new loan or program, while debt settlement involves negotiating with creditors to reduce the amount owed, typically through unregulated companies or direct negotiation[1][4][5].

5. Will debt consolidation affect my credit score?

Debt consolidation can impact your credit score, especially if you miss payments or if the consolidation involves higher interest rates or fees; however, options like Consumer Proposals and debt management plans can help rebuild credit over time[1][3][4].

If you have a question about debt see our debt questions or ask your own debt related question.

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