How to Educate Yourself About Canadian Debt SolutionsJan 19, 2016
Have you committed to paying down debt this year? Paying down debt is listed as the top financial resolution among Canadians, however, debt numbers continue to rise. Canadian families are falling further into debt, but there are many debt solutions to help you see your resolutions through. January is the time to get wise about debt by exploring your debt options. Let’s talk about one Canadian debt solution: debt consolidation.
Average Canadian household debt has reached almost $1.65 in debt for each dollar earned. Many Canadian families are struggling to cover monthly expenses, let alone service debt or add to savings. The reality is that 70 per cent of Canadians carry debt, and with low interest rates, it can be very easy to add debt to already stretched budgets. Although there are a host of debt consolidation options available to Canadians, it is important to understand that some options may cost you more money in the end. Not all debt relief options follow the same standards, which can lead to misinformation and confusion for those seeking help.
Consider options for debt consolidation
Unsecured debts can snowball quickly leaving consumers looking for repayment solutions. The most popular forms of consolidation in Canada may be a good option for your needs. These include:
Adding unsecured debts to your mortgage. This can be done using a home equity line of credit or HELOC. You can apply for a HELOC from the lender of your choice by showing proof of income. You should first take into account the total of your debts to see whether you can handle a monthly loan payment. Most loans are paid in full over 5 years so if you have a large amount of debt, the payments may be higher than affordable. Keep in mind that you will be paying further interest on your loan. You can compare by using this debt repayment calculator.
Consumer proposal. There are differences between bankruptcy and consumer proposal. As a leading alternative to bankruptcy, a consumer proposal can help you manage large sums of debt by allowing you to repay a portion of it. A Trustee in Bankruptcy will negotiate with your creditors on your behalf to pay back some of your debt. Only a Trustee can help you file a proposal to your creditors, which in turn, ceases collector calls, interest charges and further debt. Keep in mind, consumer proposals are legally binding.
Finding a debt relief professional
When looking for debt relief professionals to assist you with debt consolidation, it’s in your best interest to review their qualifications. For instance, the term “credit counsellor” can be a broadly used title but unregulated within the industry. Reputable credit counsellors will be affiliated with either the Canadian Association of Insolvency and Restructuring Professionals or Credit Counselling Canada. Not-for-profit and for-profit companies may also be misleading to consumers who may assume one means the services offered are free. Both types of agencies charge fees for their services, but the fees can vary widely and some agencies will charge additional fees such as a fee per creditor, application fees or membership fees. To avoid surprises, you shouldn’t sign a contract unless all fees have been disclosed up front. A few questions to ask when looking for a debt relief professional include:
- Will my fees be waived or reduced depending on what I can afford?
- Does the agency belong to the Better Business Bureau?
- Is the agency properly licensed?
- What services are offered to help with long term debt management?
- Is the agency accredited by Canada Credit Counselling or a provincial association?
Educate yourself this month to find the Canadian debt solution that is right for you. Join the conversation at #BDOdebtrelief #LetsTalkDebt