Now that the Christmas hype is finished, reality takes effect. The reality is that, as usual, we overspent! It was so easy buying those expensive gifts on those great little bits of plastic called "credit cards". The time of reckoning is upon us. Most of us will utilize the "minimum payment plan". Most credit card companies will accept minimum payments of 5% of the balance outstanding monthly. Even now when interest rates are so low, most Bank cards carry a rate of between 14.9% and 17.5%. Most Department store credit cards carry an interest rate of between 19.9% and 28.9%. I guess it's too late to say "don't spend money you don't have", so we'll analyze the best way of paying off the debts.
 

Your Bank is expecting you to come in for a New Year consolidation. Before you visit your Bank Manager, you should spend some time doing your own homework. In my (too) many years of representing Consumers to various lending institutions, I have learned that a loan application properly presented is half approved.
 

The Lender will be looking for you to qualify under their debt service criterium. That's where the Lender takes all your payments on existing loans, adds the payment on this consolidation loan, plus your rent (or mortgage payments), as well as your heating component and divides the total into your proven salaried income to arrive at a payment to income formula. If that figure is greater than 40%, your loan will probably be rejected. Knowing that before you start will give you an edge. You can also impress by doing a "before and after" analysis. Add up all the payments before this consolidation, and the payments after the consolidation to arrive at "cash flow" savings analysis. Present yourself (analysis in hand) by appointment, with all your most recent credit card statements, to the Loan Manager. If your credit cards are not up-to-date, forego the visit until you have brought them to current status, you don't want to apply while your present credit cards are in arrears.
 

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You should also know that the Lender will be looking for security. This is a car, or a boat, or something tangible. Household goods no longer qualify as acceptable security. You cannot use RRSP or OHOSP. If you own a home, you can apply to any Lender for a second mortgage, as long as the "loan to value" ratio (1st and 2nd mortgage combined divided into the value of the house) is below 75%. If the percentage is higher than that, your Bank or Trust Company cannot help you. In that case you should seek the help of a Mortgage Broker.
 

The whole idea of a Consolidation loan is to free you from high interest rates on credit cards, and to some extent cash flow relief. Don't lose sight however of next year's dilemma. If you get a new loan over four years, and you start over again next Christmas with new credit card debt, your Banker may not be willing to start over the whole process. In his/her eyes, you have not learned to control spending, which started the whole process in the first place.