If you are struggling with overwhelming debt, you may be considering a debt consolidation plan. However, there are certain facts about debt consolidation that you should know before you decide to move forward.
It is a third-party payment system
With a debt consolidation plan, instead of trying to keep track of all of your creditors and when your payments are due, you make one payment a month to Blue Pearl. With this program, we are not giving you a loan; instead, we are simplifying the repayment process by making it one easy monthly payment. We are also often able to get lower interest rates or fees from financial institutions, making your money go farther than it would have had you made the payment yourself.
It is simple and efficient
One of the biggest advantages of debt consolidation is that it is a very simple way to pay off your debts. Instead of juggling payments to different lenders at different times, you pay one consistent monthly fee to Blue Pearl. Once one of your creditors have been paid off, the payment we were making to them can then be directed towards your other accounts, making it an efficient system. Additionally, if you are being hounded by your creditors, you can expect to get fewer or none of those harassing phone calls anymore. As you can imagine, this is a welcome change for many of our clients!
You have to stop charging for now
When you agree to debt consolidation, it is important that you close your credit card accounts, and not reopen any until you are completely debt free. This may be difficult for some, but continuing to rack up debt is not an effective way of ridding yourself of it. You may keep one card for emergency purposes, but it should not be used for anything but absolute emergencies.
It could be perceived negatively by lenders
If part of your debt consolidation plan is to pay a lower monthly payment, your credit report could take a hit. Additionally, while consolidation does not factor into your credit score, if your credit report notes that you are using a third party, a lender may see that as a red flag. If you are looking to take out a loan soon, you may not want to enter a debt consolidation plan, or you may have to take out the loan after you have finished your plan.
A debt consolidation plan isn’t right for everyone
Though debt consolidation is a great option for many people in debt, it is not the right option for everyone. First of all, the majority of your debts should be unsecured, like credit cards or personal loans. If most of your balances are other types, such as tax debt or old parking tickets, debt consolidation is not the right option for you. Additionally, you will have to be in a position to make these payments long term, not just for a couple of months. Finally, you need to have just enough money for essentials, a small amount of savings, and your debt.
If you have more money than that or you own your own home, a different option would likely be better for you. Learn more about your options to consolidate your debt in our comprehensive debt consolidation overview.
At Blue Pearl Mortgage, we can help counsel you on the process, and you can rest assured that we will do so honestly and straightforwardly. When you need debt consolidation services in Surrey, Vancouver, or anywhere in British Columbia, Blue Pearl Mortgage can help. Contact us today for more information about debt consolidation.