Understanding bill consolidation loans and debt management in Canada.

If you are experiencing financial problems, there are some things that you can do, including applying for bill consolidation loans.

The first thing you should do is to determine exactly how serious your cash flow problem is. You can do this by completing the Personal Budget form provided. If this exercise shows a shortfall of income versus expenses, your options are:

• Reduce your expenses (if possible)
• Increase your income (if possible, by obtaining part-time work)
• Obtain a consolidation loan or mortgage to reduce your debt payments
• Contact your creditors or the Debtor Assistance Branch in BC and the Credit Counseling Service for Alberta to make arrangements for lower payments
• As a very last resort, you do have the option of declaring personal bankruptcy

If reducing your overall payments on loans and credit cards can solve your cash flow problems, a consolidation of those debts may be the answer. A consolidation could:

• Lower your cumulative interest rate
• Substantially reduce your monthly payment, particularly if done through a mortgage loan
• Give you one monthly payment, allowing you to budget more effectively

One of the disadvantages of consolidation loans is that the lower payments are usually accomplished through a longer payback (amortization) period. This could be offset by selecting a shorter amortization period, or by prepaying lump sums at the end of the term.

Whatever you do, you should not ignore your creditors. Contact them and discuss your problems and tell them that you are working on a solution and ask for advice.

Many institutions offer a variety of temporary payment and financing options. In particular, you should contact your secured creditors. Companies that have a lien on your assets can repossess them and a mortgage holder may commence foreclosure proceedings against you. Theses are serious and costly matters that can also negatively affect your credit rating for many years.

Therefore, the rules to remember are:

• Do not ignore your financial problems
• Contact your creditors and/or
• Rearrange your financing if possible
• Contact the government Debtor Assistance Branch (in BC) or the Credit Counseling Service (in Alberta) for assistance

The best alternative is usually a consolidation loan or mortgage. However, this is generally available only if you have sufficient equity in real estate or a mobile home. We at Premiere lend mortgage money based on equity in real estate or mobile homes, NOT based on credit or income. Should your bank be unable to help you with a consolidation mortgage loan, please give us a call.

To obtain a copy of your personal credit file, please click here.