The short answer is yes, a debt consolidation loan may help you avoid bankruptcy in Canada, or anywhere else. Here’s why:

If you qualify for a debt consolidation loan (and there are ways to increase your chances of qualifying for a debt consolidation loan), then you will probably pay a lower interest rate.

With a lower interest rate, even if your monthly payments are the same, more of your monthly payment will go towards principal, and less will go towards interest, so you will get your debts paid off years faster.

Use our free, on-line debt consolidation loan calculator to determine what your monthly payments are likely to be. If the numbers look reasonable, a debt consolidation loan may be the solution to your debt problems, and you may be able to avoid bankruptcy.

High interest rates on credit cards are becoming a serious problems. When the economy goes bad, credit card companies do more detailed regular credit checks on their customers, and at the first sign of trouble they will often raise the interest rates without warning.

That’s a big shock: everything was going well, and you were managing to meet your payments at 11% interest, and then all of a sudden the interest rate jumps to 22%, and you can’t even afford the minimum payments. What should you do?

First, talk to your credit card company. Perhaps they will agree to lower your interest rate, or convert your card into a loan with fixed terms of repayment, at a lower interest rate.

Second, talk to your bank about getting a debt consolidation loan. Use our free debt consolidation loan calculator to determine how much you can save.

Finally, if that doesn’t work, you may need to consider a consumer proposal as a way to consolidate your debts. You have options, so review your options now to keep your interest rates low.

If you are paying very high interest rates on your debts, a debt consolidation loan may be a better option for you than bankruptcy.  If you declare personal bankruptcy, there will be a note on your credit report for many years, which may make it more difficult to borrow in the future.  With a debt consolidation loan, you may be able to consolidate your high interest loans, like credit cards, into a lower interest consolidation loan, so that more of your monthly payments go to pay off your loan, so you get out of debt faster.
What can you do it you don’t qualify for a debt consolidation loan?  Read our special report on How to Get Out of Debt Fast Without Filing Bankruptcy for more practical tips to get out of debt and avoid bankruptcy.

There are two significant disadvantages of a debt consolidation loan.

Although a debt consolidation loan may help you save on interest charges, you still have debt. For example, a credit card debt consolidation loan does not reduce the total amount you owe. If you are not careful, and you still have access to your accounts and credit cards, there is a chance that you will be tempted to use them, and that will increase your debt and make matters worse.

Second, banks may not be as flexible as credit cards and other higher interest rate lenders. If you run into further problems, financial institutions may be less understanding and may refuse to accept a late payment. Therefore if you get a debt consolidation loan, be sure you will be able to make all payments.

Tomorrow we will review the advantages of a debt consolidation loan.

Before you apply for a debt consolidation loan, do two things.

First, prepare a monthly budget showing your monthly income and expenses.

Second, draw up a complete list of your current debts to determine the total amount of your outstanding debt. Be honest and don’t leave anything out. The loan officer will be reviewing your credit file, so honesty is the best policy.

Next, read all loan documents carefully. If the interest rate offered by your financial institution seems too high, don’t hesitate to shop around at other financial institutions to try to negotiate a better rate. However, your credit score will be reduced if you apply at numerous places in a short period of time, so do not apply at more than three different banks.

In most cases, once the loan has been granted, the bank will pay off the outstanding debts to your creditors. Your financial institution may close credit accounts you have with stores, businesses or credit card issuers to make sure that you don’t increase your debts while paying off the consolidation loan. Even if they don’t close your other accounts, cut up your credit cards to ensure that you don’t get into debt again.

I was surprised when I read the following: “South Carolina Man Burdened by $213,000 in Debt Discovers Astonishing ‘Military Strategy’ Secret that Made Him Debt Free in 4 Years!”

After some research, I discovered the following story, presented for you here:

My name is Clint Holland and the first thing you should know about me is I am not a credit expert or some kind of financial egghead. I’m just an ordinary, average guy that ended up deep in $213,000 of debt and found a 100% guaranteed and proven way to get out faster than any method currently taught. Plus, it works regardless of where you live and is not dependent upon your income.

Not long ago … I was scared I was going to lose one of my cars or my home. Things were tight and times were tough money wise. The pressure was eating away at my health and it took its toll on my family.

I was convinced I had to do something to get this monkey off our back. As you can imagine … I was buying all sorts of books and courses that promised me a way to get out of debt, but most of it was junk or stuff that was too hard to do. Some of it was good. Anyways, I ended up stumbling upon a ridiculously simple technique one day that came from a military strategy concept – and so I tried it on my mountain of debt.

Guess what? It worked! I know this sounds crazy, but with your permission I’ll prove it’s 100% true. It’s so true that I became free from that terrible $213,000 mountain of debt in just 5 years! And let me tell you, life is good now. No more creditors calling me or mailing me nasty letters to pay my bills.

Plus, I have more spending money to do what I want, when I want. And you know what? I didn’t go out and get a second job or increase my income to do it. I didn’t even get a loan or any other such nonsense you’re commonly told to do. And yet, my system is guaranteed to make you 100% debt free faster than anything on the market. That includes your mortgage, credit card, automobiles – whatever! What’s more … it will start to dramatically improve your credit in 90 days or less!

• It’s NOT filing for bankruptcy
• It’s NOT trying to sneak out of paying your bills
• It’s NOT about living on macaroni and cheese for the next 5 years
• It’s NOT about investment schemes or advice
• It’s NOT about increasing your income
• It’s NOT hard – anyone can do this
• It’s NOT anything illegal or immoral

This debt consolidation loans information blog doesn’t have the space to give more details, so  Click Here to Become Debt Free; your new life awaits!

This is perhaps the most common debt consolidation loan mistake. With the best of intentions you go and get a credit card debt consolidation loan to pay off your credit cards. You start making your loan payments, and you feel great because you only have one debt payment to make each month.

All is good.

But then, something happens. Your car breaks down, or you need to buy something for the kids. Or you want to take a vacation. And then you realize, hey, wait a minute; I have all of these credit cards that I paid off with no balances owing! I can just use my credit cards to buy what I want! Problem solved!

There is nothing wrong with using credit cards, but you should only use credit cards if you know you can pay them off in full at the end of the month. If you want to take a vacation, tha’’s fine – pay cash.

Remember, the reason you got a debt consolidation loan was to improve your finances. If you consolidate your credit cards, and then rack them up again, you have made your finances worse, not better, because you now have more debt than you started with.

For a review of the top debt consolidation loan mistakes, read our article on the Top Debt Consolidation Loan Mistakes, because if you know the mistakes, you can avoid them and have a positive experience with your debt consolidation loan.

As debt consolidation mistakes go, this is a big one. The point of a debt consolidation loan is to combine all of your debts into one manageable monthly payment, and reduce the interest rate you are paying. Unfortunately, many people make the mistake of not consolidating all of their debts.

If you have five credit cards, and you apply for a credit card debt consolidation loan, make sure you consolidate all of your credit cards! There is little point in consolidating two or three of them, only to be stuck paying high interest rate on the remaining cards!

This is a common mistake, because people assume that keeping a balance on one card is good. It isn’t. Paying a high rate of interest, if you can pay a lower rate, is never a good idea. If you consolidate your credit cards, consolidate them all, and then stop using them.

In our next article we will talk about the final big debt consolidation mistake (and if you read the previous sentence you will know what it is).

Before you apply for a debt consolidation loan, be prepared. Here are the things you need to know:

First, how much debt do you have? If you are applying for a credit card debt consolidation loan, make a list of all of your credit cards. On your list include the name of the credit card, the amount you owe, the minimum payment, and the interest rate. If you are applying to refinance a student loan, write down the amount you owe, and the interest rate you are paying.

Second, prepare a monthly budget. You need to know how much your family earns each month, and what it costs you to live. There is no point in agreeing to a debt consolidation loan where you pay $500 per month, if you can only afford $300 per month. Your budget is very important.

Third, gather all of your paperwork. Your lender will probably want to see a recent pay stub, last year’s tax return (as proof of your income), details of any assets you own (such as a car or house), and recent statements from all of your creditors (such as credit cards and bank loans). Having all of this information when you visit the lender shows that you are prepared, and increases your chances of getting the loan.

Not being prepared is a huge mistake, and significantly reduces your chances of getting the debt consolidation loan. Another element of being prepared is to check your credit report, which we will discuss in our next post.

The sad reality is that many people who get a debt consolidation loan to help them reduce their debt end up with more debt than they started with! Various studies have shown that as many as two thirds of people who get debt consolidation loans end up with more debt than they had before they got their consolidation loan.

The reason is relatively simple: the debt consolidation loan relieves the pressure you were experiencing, so you forget how you got into trouble in the first place.

If you owe money on five different credit cards and get a credit card debt consolidation loan, your life becomes easier; you forget what it was like to make five different payments each month, so you are more likely to fall back into the debt trap. You start using your credit cards again, and next thing you know, not only do you owe money on your debt consolidation loan, but now you also owe money on your credit cards.

The solution is also simple: when you consolidate, cut up your credit cards so you won’t be tempted to use them again. Once your debt consolidation loan is paid off, apply for a new credit card with a low limit to ensure you stay out of debt permanently.