Debt Consolidation in Ottawa: Here are 3 Common Mistakes to Avoid

Debt Consolidation in Ottawa

After a long period of stress from a continuous stream of annoying collection calls from creditors and a growing pile of credit card statements, perhaps you have decided to address your debt issues. Debt consolidation in Ottawa is very common, and it may feel like some kind of relief. After all, you do not have to stay on top of payments to different creditors or struggle to meet multiple payment deadlines.

Getting a debt consolidation loan is the first step in the entire process of paying down your outstanding debt and getting full control of your finances. You still have important strides to make in your long journey to become debt-free. It is beyond any doubt that debt consolidation in Ottawa is an excellent step towards repaying your debt. But if you are not careful, there is a chance you will end up worse off than before you acquired the debt consolidation loan. Be sure to consult with debt consolidation experts to avoid the potential pitfalls.

Avoid the following mistakes.

1. Failure to understand how you got into deep debt

Even when you get out of debt, you risk making the same financial mistakes unless you fully understand how you’re good into such a huge debt in the first place. Debt consolidation in Ottawa can be a Band-Aid solution because you will only be dealing with a single monthly payment and can keep tracking your expenditure. But if you do not carefully consider how you ended up with huge debt (with a high interest rate), the chances are that you will never change the spending habits that got you into a financial crisis.

Many debt consolidation options cover approximately $10,000 to $15,000. That means it took time to get into such a huge amount of debt, and it also took time to realize that you have been struggling to pay that debt back. This is the main reason you want to consolidate your debt, and you must acknowledge the severity of your financial situation and find out how you got there. Even if you have limited income, many consumer debts, student loan debt, or any other type of debt, work with a debt counseling expert to figure out how you got into deep debt.

The fix

The most effective way to understand how you got into debt and making sure that you don’t end up in such financial issues in the future is to improve your financial management system. Many experts in personal finance and debt consolidation in Ottawa unanimously agree that debt consolidation is a great option to clean up your finances and get the chance to reflect on how you manage your money. It is imperative that you recognize how you got into such a situation, define what it will take you to get out of debt and create a solid plan to ensure you prevent such financial challenges in the future.

2. Failure to consider all consolidation options

Debt Consolidation in Ottawa

Most Canadians don’t know that there is no single one-size-fits-all option to consolidate debt. There are numerous options for debt consolidation in Ottawa or the entire Ontario region. These range from moving or your credit card debt onto a single card in a balance transfer, applying for a secured or unsecured loan with a financial institution such as a bank, or putting your debt onto a line of credit.

Because so many Ontario residents still struggle with debt, some less known debt assistant options that don’t require you to apply for more credit may also be available. For instance, a debt management program is a relief option that allows you to consolidate all your payments of your unsecured debts into a single, affordable monthly payment. Another debt assistant option is a consumer proposal process, which aims at consolidating and reducing your debt.

The fix

Suppose you are looking for debt relief services or debt consolidation in Ottawa. In that case, it is essential to consult with an experienced financial adviser or credit counselor to ensure that you understand everything about your dates and how to address your unique situation. The financial professional will also help you create a realistic budget to ensure that you keep your spending habits under control. He or she will help analyze various debt consolidation options and choose what best suits your unique financial situation.

It is important to research and crunch every relevant number before you settle on any of the available debt solutions in Ontario. Carefully analyze the long-term impact of your financial decision as well because some consolidation options can leave you with a bad credit score or history for many years, even after you have paid back your debt. Your professional credit counselor can help you understand the benefits and limitations of each consolidation option they may be considering.

3. Not ditching bad spending habits

If not done right, a debt consolidation program is a difficult process that can backfire. To understand how this is possible, let’s use credit card consolidation as an illustration. Suppose you pile all your credit card balances into a single credit card balance or loan. In that case, you would effectively free up thousands of dollars in your financial account. If your monthly expenses are out of control, there is a good chance you will turn to use your credit cards again. That means you will be piling up debt instead of paying it down.

If you want to consolidate your debts, pay them off, and start afresh, it is wise to limit your access to credit services and limit your temptation to overspend. In case you prefer using lines of credit instead of a checking account, request your lender to alter it to “deposit only.” That means you will make payments but can’t spend the available credit.

The fix

Sure, closing your credit accounts in Ontario is likely to lower your overall credit ratings temporarily. However, poor debt payment patterns will do more damage. Your best bet is to keep one of your credit cards opens, particularly one with the longest and positive credit history.

Wrap up

The last mistake you must avoid is failing to set a specific pay-off date for your debt consolidation loan. Depending on the consolidation option you choose, you might find yourself making only minimum payments monthly. This is what threw you off your balance (financially) in the first place, and it is a habit you must avoid if you want to stay debt-free.

Debt consolidation in Ottawa is a great option when it comes to gaining full control over your debt and finances. However, the mistakes discussed above could make this strategy ineffective. So, consult with an experienced credit counselor to weigh your debt management and repayment options.

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