What is Debt Consolidation Lenders?
Debt consolidation refers to the process of taking out one loan to pay off other mortgages. This is a widespread option to obtain a lower interest rate and fixed interest rate for the convenience of the loan service provider.
Wikipeg says debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house. The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.
What is the Function of Debt Consolidation Lenders?
Whenever we feel suffocated by mounting debts and struggle to meet even the minimum required payments debt consolidation lenders come to our rescue. However, this is done for a fee. They help to consolidate all our outstanding debts under one umbrella debt by negotiating a repayment schedule with our creditors. This helps us to meet our obligations, at reduced monthly payments and interest rates though, may be over a longer period of time than originally agreed upon. They renegotiate and persuade our creditors to agree to a less taxing and longer repayment schedule, where our EMIs are lower and so more easily manageable. Many banks and creditors tend to agree to such renegotiations through a professional than if we approach them directly, as they feel more confident when dealing with a professional than with a defaulter personally.
How does Debt Consolidation Work in Canada?
In Canada, there are various debt relief and consolidation agencies that lend to people opting for debt consolidation loans. Such debt consolidation lenders may either buy your debt from your creditor or take repayment from you on renegotiated terms or they may talk to your creditors on your behalf for better terms. However most prefer to takeover bad debts from creditors at very low prices and then try to collect from the debtors. This gives them freedom in negotiating terms with the debtors. As banks are the largest lenders it is prudent to approach a chartered bank first for consolidation of loans before approaching private lenders.
What are the Benefits of Debt Consolidation?
It might also be more fruitful to approach the bank you bank with for your everyday needs before going someplace else. They might offer better terms as a reward for your loyalty and continued business patronage. As generally secured loans are the cheapest form of borrowings possible, if you own property then this would be your best option. If both the above venues are not open then you might try and borrow from a finance company for your debt consolidation. As these finance companies charge very high interest rates, keep them as your last resort for debt consolidation lenders. They normally charge three times as much interest as other banks and so think before borrowing from them.
There are advantages in securing a Debt Consolidation Loan such as that cited recently by bankruptcy-canada.ca
. With a debt consolidation loan you only have one payment instead of many; there is a reduced risk of being late on monthly payments. In addition, with multiple payments debtors often rack up a substantial amount of interest when they are unable to pay off each individual debt - whereas with a debt consolidation loan there is just one easy payment, so interest rates will likely be reduced each month. With a debt consolidation loan, you can pay off all of your credit cards at the same time and reduce the high interest you pay on credit card debt: debt consolidation loan interest rates tend to be lower than credit card rates, so you save money and pay off your debts faster. There will be no negative effects on your credit rating if you make all of your monthly payments on your debt consolidation loan. In fact, since you have reduced your interest payments, it is possible that your credit rating will actually improve as a result of your new debt consolidation loan.
Thinking Beyond and Coping with Developments
In today’s troubled economic climate, debt consolidation or refinancing has become very common practice and so it is the most practical way of reducing your debts and managing them more efficiently. Canadian service providers like Ontario Equity offer a wide range of services including second mortgages and debt consolidation to all Canadians at very favourable rates. So it is our own responsibility to take advantage of available options and become debt free.