Finding yourself deep in debt can be an overwhelming experience. In our society, money and credit are a part of our day-to-day lives. If you fall past due with your creditors, your credit rating will suffer and it will become very difficult to secure financing for the purchase of a vehicle or real estate. Your problems won’t stop there though, and you never know when a financial emergency will arise. That is why it is important to seek out debt help before it is too late.
There are many resources in Canada that provide debt help and will enable you to resume your life normally and without the worry of those crippling monthly payments. The road to debt relief can be a bumpy one, and that is why you should consult professionals to help you reach a debt solution that will ease your concerns.
The options available to you each have pros and cons and they each should be weighed carefully. What is good for one person may not be good for another. Many consumers focus simply on lowering their monthly payment without considering the best solution for the long run.
A very common debt solution available is debt consolidation; this course of action unifies your debt through taking out another loan that covers all of your debt with interest. In a nutshell you are simply transferring the debt from many loans into one new loan. You pay off the new loan with monthly payments that will possibly be lower than the ones you made before but the amortization period will be longer and that is how the debt consolidation company makes their money, interest collected over time.
One of the most popular methods of debt reduction is the consumer proposal. The consumer proposal enables you to merge all of your debt into a single monthly payment while also lowering what you owe overall. A licensed trustee will approach your creditors with a proposal to reduce your debt and monthly payments to achieve debt reduction for you. You must have a minimum of $5000.00 in unsecured debt or a maximum of $250,000.00 in order to take this course of action. Additionally, you are required to prove insolvency and you must be able to maintain the payments, which are generally set up over a three to five year period. Your monthly payment will typically be 2% of the principle allowing you to achieve debt relief quickly.
Credit counseling is another option available to those who are looking to leave their debt behind without climbing farther in or increasing their monthly payments. Credit counseling allows you to sit down with a financial professional to evaluate your economic viability and how much you can really afford to pay on what you owe. This form of debt management is more educational than anything else and many consumers benefit from the consolidation of payments. However, consumers often find that credit counseling doe not offer a significant enough reduction in their monthly payments to be a viable debt relief option.
Depending on how much debt you are in you may opt to consider declaring bankruptcy as an option to achieve debt relief. The caveats when it comes to declaring bankruptcy are numerous and should each be weighed carefully. Your credit will be destroyed for several years and you will be unable to purchase real estate, automobiles or other goods on credit for quite some time. Of course the benefit is that you will no longer be in debt and can begin saving the money that you were previously paying to your creditors. This option should be a last resort and only for those who see absolutely no other way of achieving a debt solution.
Debt Settlement – Your Best Debt Solution
Choosing debt settlement as a debt relief option may be a great idea for some because it features a lower monthly payment and the opportunity to reduce your debt principal, not just your interest rates. Attempting to setup a debt settlement yourself is feasible but is a risky proposition since most Canadians do not have a close relationship with creditors while debt settlement companies do. A good debt settlement company maintains close relationships with the majority of major creditors and knows when to negotiate and how to maximize the savings for you. A debt settlement is an agreement between you and the bank whereby the bank agrees to reduce the principal in exchange for an agreed upon payoff, either in a lump sum or over the course of an agreed payment plan. The bank agrees to the settlement because they realize that you are in a position of hardship and that the alternative could mean they get nothing through a bankruptcy.