More Canadians carry debt than ever. According to recent data from TransUnion, the number of Canadian active credit consumers is at an all-time high of 31.2 million. So, if you’re seeking Edmonton debt consolidation options, know you’re not alone.
The TransUnion data also shows that the average credit card balance for Canadians at the end of 2023 was $4,265, a nine percent increase from the previous year. Data also shows that debt delinquency is increasing; non-mortgage delinquencies (when payments are 90+ days late) have increased by 29.2% year over year.
Debt consolidation can be a helpful solution to economic challenges such as rising inflation rates and the rising cost of living.
This article will discuss crucial considerations for pursuing this path, including important factors to remember when choosing Edmonton debt consolidation companies, the pros and cons of this debt management option, and much more.
Edmonton Debt Consolidation 101
With debt consolidation, you’re combining multiple debts into one single payment or loan. For example, if you have multiple credit cards, you can make one monthly payment to apply to all of this debt rather than making individual payments on each card.
The hope is that you’ll be paying less in interest overall and reducing multiple obligations to one monthly payment.
However, it also has some disadvantages.
The following are some advantages and disadvantages of debt consolidation to consider:
Pros:
- Simplified repayment: You’ll make only one debt payment per month.
- Lower interest rates: Compared with credit cards or payday loans, consolidation loans tend to have lower interest rates.
- Better cash flow: If you could combine high-interest debt, you could free up more monthly income to cover other expenses.
- Peace of mind: Debt consolidation is a path to becoming debt-free. Knowing you are proactively working toward this goal can offer you a lot of peace of mind, as you know your debt is manageable.
Cons:
- Possible fees: Depending on your chosen program, you may be charged one type of fee or another, such as a loan origination fee or a service charge from a debt management company.
- Credit score impact: Before you get a debt consolidation loan, the creditor will need to pull your credit score. This is a “hard inquiry” on your credit history, which can cause a minor drop in your credit score.
Failure to pay your consolidation loan will also hurt your credit score. If you keep on top of your payments, debt consolidation should not be the end of the world for your credit score.Learn how to improve your credit score here.
- Risk of more debt: Consolidating debt without changing the patterns that caused you to accumulate debt in the first place might just lead you back into debt.
Critical Considerations for Edmonton Debt Consolidation Options
If you’re considering getting a debt consolidation loan in Edmonton, you’re in the right place. There are a few things to take into account before applying.
1. Interest Rates and Loan Terms
One commonly cited reason to consolidate debt is to obtain a lower interest rate. When deciding whether to consolidate, it can pay to shop around.
Banks, credit unions, and some debt relief companies offer debt consolidation loans, so compare the interest rates and length of the loans.
A lower rate can save you money over time, but check the repayment term—it could cost you more in interest if it runs longer.
2. Reputable Providers
Make sure you work with an accredited debt consolidation provider.
Fortunately, many credit counselling agencies and financial institutions in Edmonton provide debt consolidation programs. Look for companies that are accredited and have good standing in the industry.
A trustworthy debt consolidation provider will openly disclose their fees and services.
3. Your Financial Situation
Review your financial situation, including how much you owe, your income and monthly expenses. If you can’t see yourself being able to keep up with the payments, or if your credit score has suffered so much that you need to improve it quickly, debt consolidation might not be your solution.
You might be better off with credit counselling or a consumer proposal.
4 Edmonton Debt Consolidation Options
Now that you know more about what to look for, here are four options to help you start your search:
Consolidated Credit Canada
As the largest non-profit debt relief service in the country, Consolidated Credit Canada has offices in every province. Services include debt consolidation, debt management plans, credit counseling, and financial education. Positive reviews indicate a high level of success in helping consumers with debt.
MNP DEBT LTD.
MNP Debt LTD., one of the largest debt relief service providers in Edmonton, offers several debt relief services for residents. The company offers free consultations and helps residents assess their finances before suggesting a debt relief option that will work best for them.
Borrowell
Borrowell is an online tool for comparing Edmonton debt consolidation options. Based on your credit score and financial situation, It connects you with multiple lenders offering low-interest consolidation loans.
It is a great choice for those who like to manage their finances online. It provides free credit score monitoring and personalized financial advice.
No More Debts:
Another option to consider is No More Debts, provided by the Credit Counselling Society (a non-profit organization). This organization’s main services are credit counselling, debt consolidation programs, and debt management plans.
No More Debts is an excellent resource for individuals who want personalized guidance and assistance dealing with debt. The society’s counsellors help clients create individualized plans based on their personal finances and needs.
Debt consolidation can help Edmonton residents overwhelmed by multiple debts by simplifying their monthly payments and possibly lowering their interest rates. However, choosing the right program and provider is essential to making the right decision for your unique circumstances.
Kelly Kennedy, CMA, CPA, MBA, holds an MBA from Queens University in Ontario and is currently a finance and accounting instructor. In addition to teaching, he regularly contributes to various publications and blogs, offering expertise on a wide array of Canadian financial and investment topics.
