When is the right time to consolidate debt?

October 20, 2022 Olivia Jackson

The past few years have been challenging for many Canadians. Due to the shifting employment landscape, supply chain issues, and everyday items like gas, groceries, and utilities getting more expensive, financial struggles are real.

Canada’s household debt increased to 180.02 per cent of gross income in 2022 from 179.47 per cent in 2021. This means Canadians owe $1.80 for every one dollar they earn after taxes. 

Rising interest rates will likely push this number up even though it stands at a 30-year high. Add the value of real estate and the higher cost of rent to the current mix and it’s easy to see why financial struggles may be more intense now than ever before. 

Is it time to consolidate debt? 

Borrowing money when interest rates are rising and household budgets can’t be stretched much tighter isn’t always the best way to pay off debt, maintain good credit, and work toward being debt-free. However, when you’re struggling to pay bills, credit card balances, and other debt, it could be the best way to move forward.  

Debt consolidation offers an approach to managing, reducing, and ultimately eliminating household debt. Here’s a simple checklist to determine if now could be the right time to apply for a debt consolidation loan.

Check all that apply:

  • I tend to carry a balance every month on my credit cards, or line of credit.
  • I’m making regular payments, but only the minimum required.
  • Some or most of my bills are overdue.
  • My budget is stretched to the max! 
  • I have no money left at the end of the month for savings.
  • I feel like I can’t get ahead. 
  • I’m stressed all the time trying to figure out how to fix my financial woes.

If you checked one or more boxes, it could be time to consider debt consolidation. 

What is debt consolidation?

Debt consolidation is when you combine multiple debts into a single payment and take out a new loan to pay off these debts. All of the outstanding balances get combined into one loan with a single payment.

When it comes to finding the money for debt consolidation, you have several choices. Here, we examine the pros and cons of each:

Debt consolidation can be an effective way to get your debt under control. Know what works best for your situation and budget by talking to a loan expert at easyfinancial who can help you explore all of your options and make an informed financial decision. 

 


Disclaimer: This content is intended for informational purposes only and does not constitute financial advice on any subject matter.

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