McLennan and Company

Debt Consolidation and Credit Consolidation

First and foremost, it’s important to understand exactly what Debt Consolidation and Credit Consolidation means. In reality, both terms mean the same thing: the consolidating of your debts owed to your creditors.

How Do You Consolidate Your Debts?

Now that we have that straight, let’s move on to more important matters – how do you consolidate your debts? There are, in fact, several ways to go about your Debt Consolidation, including:

  1. A Debt Consolidation Loan at your bank or credit union (or line of credit, etc.);
  2. Consolidate with a home equity loan;
  3. Consolidate with a Debt Management Program at a non-profit Credit Counsellor;
  4. Consolidate using a Consumer Proposal, filed with a Licensed Insolvency Trustee (“LIT”).

First Steps

Before we go any further, as a Licensed Insolvency Trustee at McLennan & Company, we will always recommend that our clients try and handle their debt issues themselves, if they can afford to. That means options 1 and 2 above.

Why? Involving a Credit Counsellor (for Debt Management Program) or a Licensed Insolvency Trustee (for a Consumer Proposal) will bruise your credit-if it’s not already bruised.

What If You Can’t Qualify for a Loan?

If you find yourself in a situation where you don’t qualify for a loan, you have a few options. You either have to enter a Debt Management Program with a non-profit firm, or, see a Licensed Insolvency Trustee, such as McLennan & Company Ltd.

In deciding which option is best, we recommend you talk to us at McLennan & Company, so that we can review with you what you can afford to pay your creditors. For example, a Debt Management Program requires 100% payout to the creditors, plus costs for the program, plus interest in some cases.

When is a Consumer Proposal the Best Option?

When evaluating the best options for managing debt, there are several important factors that may lead to a Consumer Proposal making the most sense for your specific situation, including:

  1. You can’t afford to pay the creditors in full;
  2. You have government debt that is unaffordable, including income tax;
  3. You have pay day loans.

In other words, a Consumer Proposal is the only option that pays less than 100% to the creditors. It does, however, require 51% creditor approval based on dollars owed.

Are there advantages to a Consumer Proposal for Debt Consolidation?

There are several advantages to doing a Debt or Credit Consolidation with a Consumer Proposal, including:

  1. Immediate freeze on interest when filed;
  2. A legal stay of proceedings, preventing creditors from collecting and garnisheeing;
  3. You only have to make one monthly payment, which makes it easier to manage your monthly expenses;
  4. The payments can be geared to your income schedule, if it fluctuates;
  5. You can make extra payments, or even pay the Proposal off early without a penalty;
  6. There is no charge for the initial meeting to discuss a Consumer Proposal at most LIT firms, and certainly at McLennan & Company Ltd.

What Can Affect Your Credit Consolidation Options?

Of course there are unique circumstances that can affect your Credit Consolidation options, some of which are:

  1. A co-signer is connected to your debts;
  2. Whether you have any assets available, i.e. as collateral, etc.;
  3. Your current credit score;
  4. Your on-going monthly cash flow needs;
  5. Whether you have family or friends that will support you financially.

McLennan & Company Ltd Can Help

The important ‘need to know’ in debt consolidation is that there is no charge for an initial meeting at McLennan & Company Ltd., and most Licensed Insolvency Trustees. This will enable you to have a stress-free meeting to discuss your options, which we hope will lead to a brighter future. Contact our team of experienced Licensed Insolvency Trustees today for more information.