For the legal options, protection is provided from your creditors, and a structured, framework is provided for ensuring all your debts are paid off within 5 years. With the Orderly Payment of Debts and Voluntary Deposit programs, all interest rates are reduced to 5%. With a consumer proposal, all interest is eliminated and lower debt balances can be negotiated. Bankruptcy of course results in all unsecured debts being repaid as a fraction of what was originally owed.

Cons: All of these debt consolidation programs will impact your credit while you are on them. The impact of some of these programs such as a consumer proposal or bankruptcy can be significant. However, some of these programs allow your credit to recover quickly two to three years after the program ends. Not all organizations that offer these programs provide excellent budgeting help or assistance if financial problems arise while you’re on the program. Another downside to the legal programs is that they result in a permanent record with the courts. However, the Debt Management Program doesn’t suffer from this because it is run outside the courts.

One of the most positive outcomes of debt consolidation programs, especially with a non-profit agency, is that you learn new money skills and develop new money management habits that set you up for success in the years to come.

How to Make Either Debt Consolidation Loans or Programs Work for You

If you choose to use a normal debt consolidation loan, make sure to avoid falling into the trap of using repeated loans to deal with your debts. Instead, create a budget, set financial goals, and work step-by-step to get back on track and stick to your goals. If you’re interested in learning more about debt consolidation programs, contact a non-profit credit counselling organization, like us, and one of our credit counsellors can help you explore all your options. Taking the time now to make a good, informed decision will provide you with the stable financial future you need to look forward to home ownership, investing, or even a comfortable retirement.

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