Being in debt is stressful – for many, it is a reality that weighs heavily on their shoulders, keeping them up at night. Some people even flinch at the sound of their phone ringing, fearing that a debt collector will be on the other end.
So what is a person to do? Seek financial help, of course, but before you go about it, make sure that you do your research first. There are a few different options for debt relief and you want to make sure that you are choosing the right one that works for you.
Debt Consolidation Loan
A debt consolidation loan is a popular option when it comes to finding help out of a bad financial situation. It is considered a money management tool that lets you combine or consolidate your unsecured debt (like credit card debt, personal loans, phone, and hydro bills, etc.) into a single loan from a single lender. The lender will pay off all of your unsecured debts while gathering the combined sum into a single loan with a set interest rate, which you are responsible for paying back.
While it sounds good on paper, make sure you do your research before committing to a potentially bad credit consolidation loan that leaves you with even higher interest rates. That’s right – while the aim is to achieve lower interest, this isn’t always an option with some lenders, especially if you are considered a high-risk borrower. High-risk borrowers can expect interest rates of 14 percent to over 30 percent from second-tier lenders, which can do more harm than good to your financial situation.
The other problem with these types of loans is that they can be difficult to obtain unless you have an acceptable credit rating or collateral like property or other assets. This is unfortunate because people who truly need the help are the ones who are going to be denied assistance.
Debt Consolidation Program
Consider an alternative approach with a debt consolidation program provided by a non-profit organization dedicated to providing financial management services to those who need it most. While identical to a consolidation loan, the biggest difference here is that there is no loan involved and anyone can qualify to enter the program and receive the help of a certified Credit Counsellor. Not only will they consolidate your debt, lower your monthly payment, and lower (or completely stop) the interest, but they will also stop calls from collectors and guide you through the entire repayment process.
What’s more is that a Credit Counsellor will also give you the financial management skills you need to ensure you don’t fall right back into financial trouble after you’ve completed your repayment program – less than 1% of clients will ever need to do a second program. This extra bit of care just goes to show that they are truly interested in helping and not just a lender looking to collect interest off you.
So if you’re seeking debt relief, make sure to find the right kind – choosing to participate in a program vs. a standard loan can really make a huge difference in your journey towards financial wellness.