Taking the Bull by the Horns: It’s Time To Deal With Your Debt Load
Every new year, we find ourselves making resolutions to better manage our finances. Yet, as the seasons change, our financial struggles seem to remain constant. The 2018 Affordability Index Report revealed that a staggering three-quarters of Canadians are in personal debt. Alarmingly, a quarter of them feel overwhelmed by their debts. This reality is affecting the average Canadian’s ability to afford basic needs and plan for significant life events. So, the question we need to ask ourselves is, are you ready to do something about your debt load?
The first step towards resolving your debt load is to get help. Here are some vital points you need to know before seeking help from a debt professional:
Understanding Your Debt Relief Options
Before solving a problem, it’s always key to understand it. The same applies when seeking a debt professional to help you tackle your debt issues.
Working with a Licensed Insolvency Trustee (LIT)
A Licensed Insolvency Trustee (LIT) is the only debt professional licensed and authorized by the federal government to file a consumer proposal or bankruptcy on your behalf. Here are some key points about working with an LIT:
- Your first meeting with a LIT is free and non-binding.
- An LIT will examine your financial situation, address your concerns, and answer your questions before suggesting a suitable debt solution.
- If a consumer proposal or bankruptcy is not the right solution for you, an LIT can refer you to another trusted debt professional who can offer credit counselling or debt consolidation.
- If you decide to file a consumer proposal or bankruptcy, your LIT will guide you at every step, helping you make a fresh financial start.
Enlisting the Help of a Licensed Insolvency Trustee
If you’re struggling with budgeting or managing your credit, a trustee can offer one-on-one counselling. A Licensed Insolvency Trustee can also establish a Debt Management Plan (DMP) for you, also known as an informal proposal.
A DMP is significantly different from a consumer proposal. For instance, with a consumer proposal, your interest charges are halted, and you usually repay only a part of what you owe your creditors. With a DMP, you’ll typically repay 100% of your debt. However, a Licensed Trustee can negotiate with your creditors to decrease interest rates or extend your repayment period.
Considering Lenders
A bank or credit union can offer you a consolidation loan that will combine all your unsecured debts into one monthly payment. Here are a few things to consider if you are thinking about using this debt relief option:
- You may not be approved for a debt consolidation loan. Banks typically rely on your credit score and income to determine your ability to repay the loan.
- You will be charged interest on your loan, although these interest rates are likely to be lower than what you are currently paying on your credit card balances.
- If you’re using a debt consolidation loan to pay off credit card debt, remember to follow a budget and reduce your expenses if possible. Also, resist adding new charges to those newly cleared credit card balances!
Recognizing the Need for Help
Taking the first step isn’t always easy. If you’re unsure whether you need help with your debt, start by asking yourself these questions:
- Is my debt causing me stress?
- Am I missing bill payments?
- Can I only make minimum payments on my credit card balances?
- Am I getting calls from collection agencies and creditors?
- Am I using credit to supplement my income?
If you answered “yes” to any of these debt warning signs, it’s a good idea to speak with a Licensed Insolvency Trustee about possible debt solutions. If you tackle your debt load before it becomes unmanageable, you’ll have more options available to repay your debt and get your finances back on track.
