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A Step-by-Step Guide To Consolidating Your Debts

Managing your finances doesn’t have to be a stressful experience. All it takes is the implementation of specific strategies. One strategy that Canadians across the country choose is loan consolidation. 

Breaking down the steps to consolidating debts 

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Step 1: Evaluating your financial situation 

Your financial situation doesn’t have to be in a critical state to decide that loan consolidation is for you. Having simple and manageable payments is a financial goal for many Canadians, which can be achieved by merging your charges. 

The central part of evaluating your financial situation is determining how much you could save each month if you consolidated your loans. Consider everything, including your interest rate, to calculate your total credit expenses. 

Step 2: Researching loan consolidation options 

After you’ve assessed your financial situation and decided that consolidation is the best course of action, the next step is to discern how you want to consolidate. Part of this step is also picking a reliable lender, such as Alpine Credits.  

Step 3: Applying for a consolidation loan 

In some situations, the first two steps can be overlooked, and you can apply for a loan right away. While doing so makes sense in more urgent scenarios, making an informed decision is your best approach. 

Financial institutions and alternative lenders typically have their application forms available online. You may need to provide some financial documents depending on which lender you choose. The sooner you have all your documents and information prepared, the faster this step of the process will go. 

You can apply online right now. 

Step 4: Paying off your credit cards and loans 

After you’ve been approved, the money will be directly deposited into your bank account. Disperse the funds across your outstanding balances as soon as you get the chance. You can start by paying off the loans with the highest interest rate or with the largest outstanding charges.  

If you have any credit accounts you don’t need, you may shut them down to keep from overspending. However, you can keep your oldest credit card as it holds the most payment history.  

Step 5: Repaying the consolidation loan 

With the funds covering your balances, you’ll eventually see an increase in your credit score. The most likely scenario is that you’ll pay only towards the consolidation loans, meaning just one monthly payment. It’s even better to set up an automatic payment function with your lender.  

While you are repaying the loan, keep your purchases small and necessary. One characteristic of consolidation loans is that they can allow you to restructure your budgeting habits, so you don’t have to rely on loans.  

Financial institutions and loan consolidation 

Once you understand loan consolidation and how it works, the main step is determining where you want to get your loan from.  

  • Banks—a common source of funding is from the banks, and most of them can help you consolidate your outstanding balances. However, banks can have high standards when approving loan applications. Part of the application process includes submitting your credit score and income status so they can assess your ability to repay the loan.  
  • Credit unions—not everyone will be a part of a credit union. If you are, then your members are a good source of funding. If you are not, applying for a credit union will be another step you’ll have to take before applying for a loan. 
  • Alternative lenders—the lenders with typically the least requirements are alternative lenders. They are a great option if you don’t want to be part of a credit union, or the banks are too rigid. Alpine Credits is an example of an alternative lender who lends according to a homeowner’s property equity as opposed to other factors. 
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Tips for consolidation loans

As you decide if loan consolidation is the strategy you want to carry out, be mindful of a few tips. 

  • Use the loan properly—if the loan is to consolidate your bills, then spend the money only for that reason. Using it outside of its intended purpose can lead to you forfeiting your financial goal. 
  • Stick to a budget—allocate some money for the lender and some for your savings. As you pay the loan, do your best to keep purchases small unless necessary.   
  • Ask for help if something arises—many people may wonder what to do if the loan can’t be repaid. In the event of that happening, bring it up with your lender. They will be happy to work with you to determine a solution.  

Conclusion: the journey of financial security 

Loan consolidation is an effective tool for Canadians who want to improve their financial situation. They can go from repaying multiple creditors to focusing on paying just one. While consolidation loans assist with managing money, the journey doesn’t end there. Financial security is a lifelong practice, and you can start that practice with a consolidation loan.

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Frequently asked questions

In short, yes, you can qualify. Lenders like Alpine Credits accommodate people who want to borrow but do not have the adequate credit score to be approved at the bank.

Indeed, consolidating your financial obligations can help you save money in the long run. Your monthly payments and interest rates can be comparatively better than if you hadn’t consolidated. Since it allows you to save some money, it opens opportunities for you to start new financial habits.

If you find yourself in a situation where you’re unable to keep up with your payments, let your lender know as soon as possible. They usually have solutions for such problems, like having a lower monthly payment or temporarily pausing the loan. 

Since consolidation loans are still loans, you may see a slight decrease in your credit score at the start of your loan term. However, your credit score will eventually increase as you maintain your loan payments.