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Unsecured Debt Consolidation Loans Canada

Debt consolidation loans in Canada are mostly given to borrowers who have collateral to put in place of the loan. However, the opposite of that is unsecured debt consolidation loans in Canada are consolidation loans that do not have any collateral attached to them.

To qualify for an unsecured debt consolidation loans in Canada, you must have a very good credit score and must also have a cordial relationship with your lender.

Having so many debts that you are servicing can be very stressful, especially when lenders are pulling you from all angles for their money at the end of the month. The best way to resolve this or manage debt is to think of debt consolidation.

Fortunately, there are so many types of debt consolidation that you can choose from considering your financial status, the type of debt and how much your debt adds up to.

Choosing the right type of debt consolidation can be a bit confusing and you can get help from experts who are there to help individuals choose the debt consolidation that best suits them.

What is debt consolidation loans in Canada

Combining all your debts and taking a loan that will pay off all your debt so you are left with one loan to service from one lender. This type of loan is a way to manage your finances and your debt in order to avoid being stressed as well as cut down on defaults.

Most of the debts that are consolidated are unsecured debts and this makes them easier to consolidate than loans that were taken with collaterals as the security. Some of the debts that can be consolidated are unsecured personal loans, credit cards, hydro and phone bills etc.

What happens is that the loan is taken (debt consolidation loans) and the lender uses the loan you borrow to offset all your debts. Then you pay off the loan in a specified number of years in installments and at an agreed interest rate.

How do you qualify for a debt consolidation loan?

First of all, it must be noted that to be able to qualify for a debt consolidation loan from the traditional lenders you must have a very good credit score. The next thing is that your income must be quite substantial and also when all your debts are deducted you must have enough money left.

Another thing that these traditional lenders look out for before considering giving you a debt consolidation loan is that you must have collateral you can put in as security.

The aforementioned can easily qualify you for debt consolidation loans from traditional lenders as well as other lenders. Sometimes an individual might not meet all these requirements but meet some, also to be able to qualify you can have a co-signer who has a very good credit score.

This co-signer will elevate you to the standard where you will be given the loan since he or she will stand in as a guarantor and will be held accountable if you default on your loan.

For example, if your monthly repayments for debts are very high and your salary is not that high when your debts are consolidated the amount of money you will get as a loan won’t be enough.

So, in essence, the debt consolidation loans won’t work for you or will not be enough to take care of your debts and you must try other options. Talking to an expert or a credit counselor can also help you know if a debt consolidation loan will work for you or if you need to consider other options. Borrowers must bear in mind that no matter how bad your situation is, there is a solution out there for you.

Who qualifies for unsecured debt consolidation loans in Canada?

To have access to unsecured debt consolidation loans in Canada, you must be someone who has a clean credit score. By clean I mean, you must have a credit score that does not have defaults showing on your report.

Your relationship with your lenders must be top-notch, in the sense that your accounts are not in debt and all transactions you have engaged the lenders on have always been successful. This definitely gives you leverage with your lenders when it comes to getting an unsecured debt consolidation loans in Canada.

Secured as against unsecured debt consolidation loans

Debt consolidation loans can be divided into two categories: secured and unsecured.

The main difference between these two options is that with the secured debt consolidation loans, you will need collateral (a house, car etc.) to use as security for the loan. Whiles with the unsecured loans there is no need for any collateral.

The debt consolidation loans that are typically given out to borrowers are unsecured debt consolidation loans, these loans also have a much higher interest rate.

Advantages of debt consolidations loans

• You are able to pay your debts faster through consolidated loans:

In the first place, the reason for you seeking debt consolidation loans is because paying back your different loans from different lenders is stressful. A debt consolidation loan will, therefore, help you to pay off all these debts at a go leaving you with only the consolidated loan.

• No fees are charged for debt consolidation loans:

Normally the banks, non-bank financial institution or credit unions do not charge any fees when taking debt consolidation loans.

• Typically, the interest rates charged on debt consolidation loans are lower as compared to payday loans:

If compared to personal loans, the interest rates on debt consolidation loans can be said to be high. But the interest rates on debt consolidation loans are much lower when compared to payday loans.

This makes it much convenient for borrowers who need the release of having to serve so many loans from different lenders at a go.

• You are left with only one loan to service:

There is so much stress in paying so many debts at the end of every month. The possibility of you missing out on some payments is very easy. When you go for unsecured debt consolidation loans in Canada, you are able to relax and pay that one loan religiously.