Answer: If you qualify for a debt consolidation loan, and can afford to make the payments, a debt consolidation loan is better than bankruptcy. If you can’t, then bankruptcy may be necessary.
A debt consolidation loan allows you to take all of your high interest debts, like credit cards, and consolidate them into one loan at a lower interest rate, which saves interest and helps you get out of debt faster.
The first question to ask is do I qualify for a debt consolidation loan? To qualify you need to have a good income, and your debts need to be low enough that the bank will be willing to lend you enough to pay off your debts. In most cases Canadians with debt problems have too much debt to qualify for a loan.
The next question is whether or not you can afford the payments. A debt consolidation loan does not reduce the amount you owe; it just combines all of your payments into one. If that one payment is still more than you can afford, there’s not much point in getting a debt consolidation loan, even if you do qualify, because you won’t be able to make your monthly payments.
However, even if you don’t qualify for a loan, that doesn’t mean that you should immediately go bankrupt. It may be possible instead to file a consumer proposal.
A consumer proposal is like a loan, because you make one payment each month to deal with all of your debts. But it’s better than a loan because in most cases you pay back less than the full amount owing, so you can get out of debt faster.
To find out if a consumer proposal or bankruptcy in Canada is necessary for you, contact a licensed trustee today for a no charge initial consultation.