Debt Relief Experts
One of the many benefits of choosing Hoyes Michalos is that you’re not only choosing one person to help you get out of debt, you’re choosing a team. Our Licensed Insolvency Trustees have a variety of skill sets and each one of them brings something different to the table. We’re able to pull from each other’s experience and knowledge and come up with the best possible solution to help you deal with your debt.
Something our team noticed across Southern Ontario is that more people are turning to debt consolidation as a way to help manage their existing debt. A debt consolidation loan is a loan that allows you to repay many other debts. You are consolidating your many debts into one, by refinancing with a new loan to pay off several old debts.
Seeing that so many of you are turning to this method, we came together and thought of 25 debt consolidation tips to help you on your way.
Tip #1
Start with a list of your debts and set some repayment goals. Ask yourself how quickly you would like to eliminate your debt. Debt consolidation on its own doesn’t eliminate debt, it just transfers your balances to a new, hopefully lower interest rate, loan. This may help you pay off debt sooner.
– Scott Schaefer, Kitchener & Stratford Offices
Tip #2
Begin by taking advantage of any low-interest rate balance transfer programs offered by your credit card company. Know that there may be a limit on how many months the low interest rate will apply. Watch out for balance transfer fees that may eat up any potential interest savings.
– Howard Hayes, Cambridge & Brantford Offices
Tip #3
Work on improving your credit score before consolidating your credit to reduce your interest rate. Pay off smaller credit card balances completely, but keep the accounts open. This will lower your utilization rate, which is good for your credit rating. Cut up the cards so you are not tempted to drive up the balances again.
– Doug Hoyes, Co-founder
Tip #4
Don’t hesitate to contact existing credit card providers and ask them to lower your interest rate. If you have a reasonable credit score, you may qualify for one of their low-rate cards.
– Ted Michalos, Co-founder
Tip #5
Talk to your bank or credit union about a personal term loan. Term loans usually come with lower interest rates than most credit card rates. In exchange for this lower interest rate, know that you are committing to a fixed monthly debt payment.
– Jason Quinney, Brampton, North York and Vaughan Offices
Tip #6
Balance the competing objectives of increasing your monthly cash flow and paying off your debt sooner. Make your payments as large as you can afford and the term of your loan as short as you reasonably can.
– Ian Martin, Kitchener & Stratford Offies
Tip #7
One of the cheapest ways to consolidate debt is to use your home equity. Taking out a second mortgage to consolidate debt is only a good option, however, if you can afford the monthly mortgage payment. Be mindful of the fact that you will risk losing your home if you default on your mortgage because the payments are too high to handle.
– Brian McIlmoyle, Mississauga & Toronto Danforth Offices
Tip #8
If you own a home, compare the full cost between a personal loan and a home equity loan. Factor in any charges including appraisal fees and mortgage security registration costs. Look at the term of each loan and the total interest payments over the life of the loan, not just your monthly payment.
– Richard Quinney, Barrie Office
Tip #9
A home equity line of credit (HELOC) can reduce your interest rate while offering flexible monthly payments. Your HELOC terms may require you to pay interest only, or interest + 1 or 2%. This can help you balance your budget initially while you look for ways to cut back on spending.
– Benny Mendlowitz, North York & Scarborough Offices
Tip #10
While a variable rate mortgage may carry a lower rate, consider a fixed rate mortgage. In most cases you’ll still significantly lower your monthly payments, but will have the financial security of knowing your payment won’t rise if interest rates increase.
– Julie Wildman
Tip #11
If you expect to receive any bonuses, commissions, or windfalls, consider consolidation options that allow you to make extra payments. An HELOC or mortgage with double up, or extra payment options means you can use that extra cash against your debt payment.
– Sandra Sykora, Toronto Yonge/Bloor & Downtown Toronto Offices
Tip #12
Be careful of hidden costs like automatic rate increases in the event of a missed or late payment.
– Scott Schaefer, Kitchener & Stratford Offices
Tip #13
Debt consolidation does not change your spending habits. If you are spending more than you are earning, consolidating your debt is only part of the solution. Balance your budget so your credit card balances don’t grow again.
– Joel Sandwith, London & Sarnia Offices
Tip #14
Debt consolidation can help you consolidate credit cards, existing loans, even take care of outstanding bills through bill consolidation. However, as part of the process, look to the underlying reason you accumulated these debts in the first place and create a play to avoid debt in the future.
– Ianina Raguimov, Oshawa Office
Tip #15
A debt consolidation loan can help your credit score in two ways: 1) Term loans are considered better in terms for your credit score than having revolving credit like a credit card. This is assuming you’re making your loan payments in full, and on time each month. 2) You can control your spending going forward; don’t close your original credit cards (cut them up instead). Having open accounts with their original credit limit and a zero balance will help lower your credit utilization rate.
– Rebecca Martyn, Leamington & Windsor Ofices
Tip #16
If you have bad credit, shop around for a good lender. There are many bad credit debt consolidation programs that charge extra fees and high interest costs and these may not be your best option.
– Billy Martell, Burlington & Hamilton Offices
Tip #17
If you don’t have any hard assets to pledge as collateral and have poor credit, asking someone to co-sign your consolidation loan can help you qualify for a lower rate loan. This works in your favour, but if you miss payments, your lender will look to your co-signer for payment. This could not only ruin your relationship, but also their credit rating.
– Brian McIlmoyle, Mississauga & Toronto Danforth Offices
Tip #18
Be careful not to consolidate bad debt into good debt. Rolling an unpaid balance on your car loan into a new car loan isn’t always a good idea. You may end up owing more than the vehicle is worth.
– Doug Hoyes, Co-founder
Tip #19
Make sure you lower your interest rate on all debts you consolidate. If you have a low interest car loan, as well as high interest credit card debt, consider leaving the car loan on its own.
– Howard Hayes, Cambridge & Stratford Offices
Tip #20
Carefully consider before rolling student debt into your mortgage or private loan. There are federal programs that can help you obtain some deferral or relief from student loan payments if you’re experiencing financial hardship.
– Jason Quinney, Brampton, North York & Vaughan Offices
Tip #21
Research the debt consolidation program you’re considering. There are many ways to consolidate your debt including a debt consolidation loan, debt management plan, debt settlement and consumer proposal. Compare the costs and benefits of each program.
– Joel Sandwith, London & Sarnia Offices
Tip #22
Know who you are dealing with. Avoid any debt consolidation options that requires you to pay significant processing or consultation fees. Whether these are upfront, or throughout the life of the loan. Make sure the person you are dealing with is qualified and has legitimate credentials.
– Ted Michalos, Co-founder
Tip #23
If you are only making minimum payments against your credit card balances today, debt consolidation may not be your best solution. Compare the repayment periods and costs with other debt relief alternatives.
– Ianina Raguimov, Oshawa Office
Tip #24
If you have more debt than you can repay, you may need debt relief, not just interest relief. If so, look at options like a consumer proposal, which will consolidate your debts into one payment, and lower the actual amount of debt you must repay.
– Sandra Sykora, Toronto Yonge/Bloor & Downtown Toronto Offices
Tip #25
Once you consolidate your debt, don’t incur any new debt. Debt consolidation often fails because people continue to use credit to make ends meet, racking up new debt on top of old debt.
– Doug Hoyes, Co-founder
