The cost of borrowing money is called “interest”. Interest rates varies depending on lenders. These are some of the lenders: banks, credit unions, finance companies, credit card companies, loan companies (like Pay Day loans) and private lenders.
Of the above lenders, banks charge the lowest interest rate. Credit card companies charge an average of 19% up to about 29.99% per annum. Finance companies, credit card companies, loan companies and private lenders charge much higher interest than banks.
If you have debts with high interest rates from several creditors other than banks like: credit cards, Pay Day loans and private lenders, you need to consolidate those debts – that is to combine them into one bigger loan with lower interest.
An ideal lender to consolidate your debts is from a bank for interest rate is usually the lowest among lenders. However, the requirements are rigid. For you to get approve, you have to meet: income requirement, good credit score, a steady employment and in some cases a collateral/security is required like a car or a house if you own one.
Because of the above requirements, it is not easy to get a loan from a bank. If you cannot consolidate from a bank or with a lender with lower interest rate, you will keep paying exorbitant interest rate. The consequence, would be, you could never be able to get out of debts for the payments you make go mostly to interest.
Should you not able to consolidate your debts with lower interest rate, and you really want to improve your finances, without filing bankruptcy, your next option is to file a Consumer Proposal. This is to pay only a portion of your debts without interest. The amount you pay could be only 50% of the amount of your debts depending on your income and dependents.
Approved proposal amount is payable up to sixty (60) months and could be paid in full anytime without penalty. After you paid in full the amount of your Consumer Proposal, you are given a Certificate of Full Payment.
Thereafter, you can start establishing your credit score, and you are on your way to financial independence by managing your finances – that is when you learn NOT to spend more than what you earn.