Why should I consolidate my debts?

Got debt? Three-quarters of Canadians do. Learn about the benefits of consolidating your debts.

In 2013, three-quarters of Canadians said they were in debt and owed an average amount of nearly $16,000.

When you have debt, it can feel like there’s an axe hovering just above your head, ready to drop. Many people struggle with debt-related stress and anxiety on a daily basis.

• Climbing out of debt can be difficult, but the rewards are worth it. If you’re struggling with your debts, there are many advantages to debt consolidation.

In the simplest terms, debt consolidation means taking out one big loan to pay off many small loans.

Small loans usually have high interest, but big loans offer a much better rate. Think about the interest rate on a credit card versus a student loan, for example. Debt consolidation is really about increasing your leverage with the goal of lowering your interest rate.

• Lower interest rates means you get out of debt faster
• It’s easier to plan for and make just one payment each month
• You can use your assets (such as a home) to secure a lower interest rate
• You protect your credit rating

Debt consolidation is a great option for people who need a lower payment.

• Plus, the money you save with a lower interest rate really adds up.
• Finally, when you consolidate your debts, you protect your consumer credit score, since the sum of the loan is used to pay off creditors and there are no delinquent payments being reported to the credit bureaus, as can be the case with debt settlements.