If you are balancing several high interest loans, you are likely looking for an Ontario debt consolidation plan that will:
- reduce your monthly payments so you can balance your budget;
- save money on interest payments; and
- replace many payments each month with one affordable monthly payment.
As expert debt advisors, an Ontario bankruptcy trustee can help you explore your debt consolidation options. We can help you choose the right program to fit your individual circumstances.
Debt Consolidation Loan
A debt consolidation loan is where you borrow new money and use those funds to repay higher interest debts such as credit card debt. Your new loan should have a lower interest rate which will allow you to either lower your monthly payment or, keep the same payment and pay off your debts faster.
A debt consolidation loan is a good option if you still have reasonably good credit and have some source of stable income to be able to afford the monthly payments. If you have poor credit, you may be asked to use your home equity, car or other assets you own as security for the loan. Your lender can also ask that you have someone with better credit than you co-sign your loan to guarantee repayment of your debt.
You should be aware however that a debt consolidation loan does not reduce your total debt. If you have $40,000 owing on six credit cards and you get a $40,000 debt consolidation loan, you still owe $40,000. With interest you will repay much more than the $40,000 over time.
Debt Consolidation and Settlement
If you do not qualify for a debt consolidation loan and you cannot afford to repay your debts in full but still want to consolidate your debts into one monthly payment, an Ontario bankruptcy trustee can offer you two additional alternatives.
When you file a consumer proposal in Ontario your trustee negotiates an agreement with all of your unsecured creditors to accept a single monthly payment amount for a period of time in exchange for the forgiveness of your debts.
A consumer proposal is a form of debt consolidation because you end up paying one, lower monthly payment to your trustee rather than balancing multiple payments between your creditors.
Unlike a debt consolidation loan however, the amount you repay is less than your total debt. So if you owe $40,000 on six credit cards today, you may be able to settle that debt with a monthly payment of only $240 for 5 years. This means you repay only $14,400 in total.
If you cannot support the payments in a consumer proposal, even filing bankruptcy in Ontario can have the same debt consolidation effect on your monthly money management. Filing bankruptcy provides immediate protection from your creditors; you stop making your old payments and make one monthly payment to your trustee during your bankruptcy. If this is your first bankruptcy and your income is below the surplus income threshold you may only be required to make these payments for nine months.
Our best advice is to book an appointment with an Ontario bankruptcy trustee today to discuss your debt consolidation options. All of our trustees offer a confidential, no-charge initial consultation. Book an appointment today and consolidate your debts.