Credit card debt consolidation programs vs. loans that consolidate bills

If you consider debt consolidation as a viable solution to get out of debt, you’ll find lots of programs to choose from. Often times, debt consolidation services Toronto is misrepresented by individuals and institutions that overpromise to get individuals out of debt very fast. Some people will lie in order to hook customers to sign contracts that put them in further debt. You need to be cautious and understand what you’re getting yourself into should you consider any of the common debt consolidation programs.

How debt consolidation loans work

With this type of loan, the lender will issue a single personal loan that is going to be used to pay off certain high-interest loans like credit cards. You will be required to make monthly payments for a specific time period, mostly for two to five years. The interest rate is usually fixed and depends on your credit score.

Opt for a debt consolidation loan if you:

  • Are sure you will not accumulate additional debt if you pay off what you owe every month
  • Can access a low interest loan than what you are currently paying
  • Want to make repayment process easier by eliminating the multiple smaller payments you make every month.

Credit card debt consolidation programs

This option allows you to apply for a 0% interest credit card which you can transfer your balances to. Eventually, this option allows you to save money. Be aware that the 0% interest is usually an introductory offer. After it elapses, the interest rates can be really high. Try and complete payments during this introductory offer period. A balance transfer credit card should only be taken if you have the discipline to pay it off before the introductory offer expires. Bear in mind that the amount of debt that you can transfer to this card is usually limited so it may not be a viable solution if you owe large amounts of credit card debt.

Consolidating multiple bills

You may have multiple bills such as utilities, day to day expenses and other unsecured credits that you want to consolidate into a single payment. Some banks and credit unions offer this type of program. Should you consider consolidating multiple bills, you need to closely look at the fees that the lender will charge. There are lenders who will charge transfer fees as well as annual fees which make it even more expensive to clear your debt. Review the program thoroughly to understand how much you will pay in the long run and whether the terms are better than your current situation.

When looking for options such as debt settlement Toronto, always opt for a lender who offers support. There are lenders who will pay the creditors directly making the repayment process much easier. You may even be asked to provide a co-signer in order for the interest rates to be reduced. Weigh all these options and discuss them with a debt relief expert or counselor who will help you to choose what works best for your situation.


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