The pressures of debt can result in a host of negative effects on a person and their wellbeing. Studies have shown that debt impacts much more than just our bank accounts. Debt relates to our emotions, mental wellbeing, and the quality of our personal relationships.

Stress is one of the biggest side effects of debt. Your mind might always be thinking about the amount of money you owe as well as wondering how you might deal with your debt and make your payments. If you’re in a position where debt is causing you stress and negatively impacting your relationships, then you should know that it’s possible to get help with your debt problems and work towards a goal of a debt-free future.

What is Debt Consolidation?

Maybe you’ve turned to family and friends and asked them for advice for how to get out from underneath the pressures of your debt. Someone might have mentioned debt consolidation and maybe it sounds like it could help. You should know that debt consolidation might look like the solution to your problems, but this path may not the best way to go about handling your financial issues.

A debt consolidation loan attracts individuals who want to pay off their debt as quickly as possible. However, it’s fixing debt with debt. Debt consolidation loans combine several sources of debt and offer the debtor a lump sum to pay their creditors, which means the debtor gets to feel some relief and has to only focus on paying back the one creditor. This may be enough to help you gain control over your finances, but in some cases, it is not.

The Problem with Debt Consolidation Loans

One of the problems with these loans comes down to your credit score. In most cases, people who are in a position where they are seeking a debt consolidation loan already have a bad credit history. As a result, predatory lenders with unfair interest rates have a lot of sway with the person who needs debt relief.

These lenders understand that those seeking debt relief are in a vulnerable position and need money quickly, so they offer loans with interest rates that could be even higher than the rate on your credit card bill.

Insolvency Alternatives That Work

You deserve to find a debt solution that doesn’t leave you in a worse position than when you first sought help. You deserve an insolvency solution that makes financial sense and that leads you towards financial stability.

Start your debt recovery journey off right with a consultation with a Licensed Insolvency Trustee (formerly known as a bankruptcy trustee) at a reputable firm. These credit professionals will take the time to understand your situation and present you with the best options for handling your debt.

You might be a good candidate for a consumer proposal in Ontario, an agreement between a debtor and their creditors. In a consumer proposal, the debtor and creditor agree that the debtor can repay a portion of the debt in regular payments for a period of time up to five years. Consumer proposals not only reduce the total amount of your debt, but as soon as a bankruptcy trustee files one on your behalf, any collection efforts or wage garnishment are put to an immediate stop.

What’s great about handling your insolvency with a consumer proposal is that you also get credit counselling, something that a debt consolidation loan does not offer. Your trustee will help you find your way out of debt and give you the tools to avoid it in the future. You’ll be able to climb out of debt with a better grasp on your finances and a regained optimism about your future.