Debt Consolidation: How Do I Consolidate Debt With A Personal Loan?
December 19, 2018
The holidays are fast approaching! You’re probably sick of hearing us say it, but the holidays can be an exceptionally expensive season if you’re not careful. It’s tempting to go and use your credit card for everything this time of year, but not so fast.
According to figures from Equifax Canada, household debt in Canada has skyrocketed to $1.8 trillion and this number includes $90 billion in credit card debt. If you’ve done a little too much spending leading up to this point, it might be useful to think about taking a debt consolidation loan to pay off any high-interest debt you may have in the new year. Doing so can help you save on interest, get out of debt faster, and improve your financial well-being in general.
What is debt consolidation?
Debt consolidation is where you obtain a new loan to pay out a number of debts, bills and/or smaller loans that you’re currently making payments on. Doing so brings the debts together into a simple monthly payment, which most people find easier to keep track of. Consolidating a loan makes debt repayment easy and can also provide more favourable payoff terms, such as a lower monthly interest rate to save money.
If you’re interested in learning more about debt consolidation, here are a few ways it can help improve your financial well-being in 2019!
1. Debt consolidation can help you save money on interest
The typical credit card has an interest rate of 19.99%. If you get behind on payments, it’s easy to get caught up in compounding interest – meaning, you’re essentially paying interest on your interest. We repeat: do not get into the trap of just paying the minimum amount, because you will be in debt for much, much longer. Also, if you get behind on your payments, the credit card issuer can increase your interest rate by as much as 29.99%.
As of 2017, the average Canadian is now more than $22,000 in debt and that number is only increasing. If you have a great credit score of 660 or above, you could qualify for a Borrowell low-interest personal loan to pay off your credit cards and save on interest.
2. Debt consolidation can help you get out debt faster
When you’re only making the minimum payments on your credit card balance, then you have no way of knowing when you’ll be debt-free.
Let’s say you currently have a $10,000 balance on your credit card with an interest rate of 19.99%. If you make payments of $250 each month, it would take you 5 years and 7 months to pay off your debt and you’d end up paying $6,547 in interest.1
Now compare this with a Borrowell loan that has an interest rate of 10.5%. You could become debt-free in just three years and pay only $1,734.93 in interest. This means you’re saving an estimated $4,812 by choosing a Borrowell loan.2
Consolidating your debt with a low-interest personal loan is a smarter way to manage debt and can help you get out of it sooner.
3. Debt consolidation may help improve your financial well-being
Consolidating your credit card debt with a low-interest loan can give you peace of mind. High-interest debt can have a mental and physical toll on well-being, especially when you don’t have a plan to get out of it. A low-interest personal loan gives you the option of a 3-year or 5-year term, essentially providing you with your very own debt-free date.
Borrowell is a completely online application, so you won’t ever need to set foot in a bank. If we’re being totally honest, you wouldn’t even have to leave your bed (which is great, considering that Canadian winter, though).
You can instantly check your rate and get a quote without affecting your credit score, which you’ll also get in the process. Become one of the thousands of Canadians that have borrowed from Borrowell to get out of debt and improve their financial well-being.
Make 2019 the year you take control of your finances. Wishing you a safe and happy 2019 from us at Borrowell!
1Based on credit card APR of 19.99% and credit card debt repayment of $250 per month.
2Please note that final approval of your application for a Borrowell loan is conditional on completion of the steps set out in your application (including identity, income, and bank account verification) as well any further underwriting review deemed necessary. Additional documents may be required. Borrowell retains the right to adjust any loan options presented to you or to decline your application at any time prior to final approval.