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Debunking Misinformation: Credit Counselling vs. Bank Consolidation Loans

When struggling with debt, it's essential to understand the differences between credit counselling and bank consolidation loans, as misinformation can lead to poor financial decisions.

Credit Counselling: This service helps you manage debt through a debt management plan (DMP), where you make one consolidated payment to your credit counsellor, who then disburses it to your creditors. While this can simplify payments and potentially reduce interest rates, it's important to note that enrolling in a DMP is recorded on your credit report, impact your credit score negatively and impact your ability to qualify for mortgage financing for a minimum of to two years after completion.

Bank Consolidation Loan: This is a loan from a bank or financial institution that combines multiple debts into a single loan with one monthly payment. Unlike credit counselling, a consolidation loan does not appear as a special program on your credit report. However, the application for the loan and the closing of multiple accounts can temporarily affect your credit score. This is a better option option with minimal impact to your credit.

Misinformation often leads people to believe that credit counselling programs are the same as bank consolidation loans. Both options can be steps toward financial stability when used correctly, however credit counselling is viewed in the same negative light by mortgage lenders as consumer proposal and bankruptcy. It's crucial to assess your financial situation and consult with a professional to determine the best path for your needs. Start by contacting your bank to assess your options.

Contact The Mortgage Missus Inc. today to learn more!

Tonia Mercer | The Mortgage Missus Inc.

About the author,

Tonia Mercer is an independent mortgage broker. She has been in the industry for 15 years, in 2021 she launched her own brokerage The Mortgage Missus Inc. 

Tonia is passionate about financial education and believes that working with independent experts is the best way to get unbiased, professional advice. She has joined forces with local independent home and auto, financial advisor, legal, appraiser and real estate service providers.Effectively creating a concierge service for all things financial and real estate.

Tonia donates a portion of all mortgage revenue to Mercer's Mission, a street dog and cat feeding mission in the Dominican Republic. 

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