Make Sure You’re Getting The Best Deal
If you’re looking for a car, you don’t buy the first one you see. It’s the same when you borrow money you could save money by looking around for the best deal.
Compare products from different banks or credit providers and check what fees they charge. Some options could cost you more, so make sure they’re worth it.
The Ontario Limitations Act
If you have old credit card or bank debt that has been sent to collections you may or may not need to file bankruptcy to deal with that debt.
Debts do have a statute of limitations. Both the federal government and provinces have legislation that limits how long a creditor can collect on old debt. In Ontario, the appropriate act is called the Ontario Limitations Act.
Section 4 of the Ontario Limitations Act states that:
4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.
In simple terms, a creditor is required to commence legal action against you within two years. This two year period is generally acknowledged to be two years from the date you stopped making payments on the debt. If you defaulted on your debt before January 1, 2004 however, your creditor has six years to make a claim for payment.
Some other things you should know:
If your debts are over two years old you could simply choose to do nothing, and wait to see. If you have other debts, you could consider bankruptcy or a consumer proposal.
Need Some Advice And Support
If you get stuck along the way or just want some free and confidential advice and non-judgmental supportcontactMABS or read more about how MABS can help.
If you decide to contact MABS, it would be useful tonote all your questions andhave your most recent letters, emails or court documents from your creditors to hand and any credit agreements if you can find them.
You can also arrange to email either My Full Financial Picture or financial statement for a MABS Adviser to look at before your appointment if you wish. But even if you dont have this information, still make the call and MABS will help.
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Should I Consolidate Debt While Unemployed
The prospects for debt consolidation while unemployed are admittedly less than someone with an income. Some creditors may not be willing to issue new debt consolidation loans for bad credit or unemployed individuals. Creditors may also be hesitant to issue a balance transfer credit card without proof of income. Thats because creditors want to know that you can repay the loan without issue.
If you have an excellent credit score and a strong history of on-time payments, your existing creditor could be willing to work with you to move balances to a balance transfer credit card. But since these cards often come with one-time fees, youll need to assess the benefit against the cost.
If you were pre-approved for a debt consolidation loan before losing your job, the lender might still issue a loan, albeit with a higher interest rate. You may also have a greater chance of being approved for a debt consolidation loan if youre willing to put up collateral like a car or home to secure the loan.
What Are Some Alternatives
So, while no debt relief options are provided directly from the government, there are still some great options to not only help you get out of debt but also to educate yourself about the world of finance. With that in mind, here are some of the best debt relief options for you in Canada:
Debt Consolidation
Debt consolidation is perfect for those with a lot of debt from a variety of different places. It can be extremely hard to manage several debts of different origins. Essentially, debt consolidation helps by rolling your numerous, smaller debts into one large debt.
Want to know how debt consolidation can help your financial situation?
Oftentimes, you will be able to get a lower interest rate on this debt consolidation loan and in the process, managing your debts will become much easier as you only have one to pay. There are both unsecured and secured options available and the one you end up choosing will depend on the assets you have, your credit score, and more.
Did your application for a debt consolidation loan get denied?
Debt Management/Credit Counselling Programs
Learn the types of debt you can consolidate with a debt management program.
Check this out if youre trying to ?
Debt Settlement
If you are very deep in debt and dont have enough money to get out of it, settling your debt could be an option. In a debt settlement, you will work closely with a counsellor, who will reach out to your creditors and try to agree upon a possible debt reduction.
Bankruptcy
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How Debt Relief Works In Canada
Canada debt relief programs operate on the principle that if you are struggling, you should not have to pay more to your creditors than what is absolutely required. Many Canadians do not know that creditors are often willing to consider debts paid in full when they reach an agreement with one of their debtors to settle a debt for less than what is actually owed. After all, why pay back the full $15,000 in principal plus additional interest when you might be able to settle the debt for $6,000 or less?Debt relief Canada is designed for those with a large amount of credit card debt and other debts that are not secured by property or other collateral. A debt service provider that is licensed by the government will work with your creditors to get them to come to a settlement agreement that is in your best interest and allows you to reduce a significant portion of your debt load without the harsh effects of bankruptcy on your credit.With the right debt solution, you can:
- Reduce a significant portion of your debt balance
- Combine all your payments into one lower monthly payment
- Get out of debt in as little as 24 48 months
- Become debt free without filing bankruptcy
How To Use Your Credit Properly Even While Paying Down Debt
There’s no foolproof solution for avoiding my situation, outside of avoiding debt in the first place but you can keep some tricks in mind.
The method Rossman recommends for keeping credit monitors at bay is surprisingly simple. “Using a card occasionally, even for small purchases that you pay off right away, can help you ward off unwanted decreases,” he says.
But depending on your bank, you might have to use that card more than just “occasionally.” Last year, Rossman says, he received a letter that one of his credit limits was cut in half, because he rarely used more than 10% of his limit. “I was using it, just not a lot,” he says.
Quickly, Rossman called his bank’s customer service team and asked for his old limit. Fortunately, the bank said yes, but that won’t happen every time, Rossman says.
Don’t use more than 30%. Always use more than 10%. Finding that sweet spot is hard. Doing it regularly feels impossible but I’m sticking to it.
Today, I still have one credit card active. I set limits on monthly charges, and pay my statement on time and in full. My credit score is up 20 points since the beginning of 2021.
I’m using my repayment budget the $419 per month, and my student loan payments, which are still in forbearance to rebuild my emergency fund.
There will certainly be some other bump in the road ahead. When that happens, I’ll take a deep breath and start researching again.
Until then, I’m going to enjoy some mezcal.
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General Consumer Debt Trends And Stats
After a year of financial turmoil caused by the pandemic, revolving debts such as credit card balances had rapidly dropped in 2020. On the other hand, other types of consumer debt such as mortgages, auto loans, and student loans, also known as non-revolving debts, have grown since the previous year.
1. In the US, consumer debt increased at a seasonally adjusted annual rate of 10% in May 2021.
The total consumer debt for 2021 did not experience a considerable change since last years $4.2 trillion record. This is an achievement that America managed to reach just right before COVID-19 broke in. Consumer debt, together with consumer spending, encountered a crisis in response to the pandemic outbreak, jeopardizing the local economy as a result.
Today, the total consumer debt in America has started to grow back again, recovering the record established during the pre-pandemic period.
2. In February 2020, revolving debt amounted to a record $1.1 trillion.
As mentioned earlier, revolving debt mainly involves credit card debt.
In May 2021, the overall deficit has grown by 11.4% to around $974 billionthis came after a 3.4% decline in the first quarter.
Even with the May debt growth, the credit statistics for 2021 still indicate a remarkable decrease in debt compared to 2020.
3. Non-revolving debt has reached a staggering 76% of all consumer debt.
4. Americans need to set aside 33% of their monthly income for paying debts.
Why Cirpa Would Help Millions Of Americans
There are four key dimensions to consider when evaluating CIRPA: speed, cost, security, and effectiveness.
Speed: CIRPA has the advantage of utilizing existing lending relationships between consumers and credit card issuers. Instead of waiting for direct deposits, prepaid cards, or paper checks, consumers who have credit card would have access to relief immediately. For the subset of Americans who do not have credit cards, CIRPA could mail them checks to cover benefits leaving them no worse off from a timing perspective than waiting for a stimulus check in the mail.
Cost: Last year American consumers spent approximately $122 billion in credit card interest. If CIRPA were implemented for six months, it would cost at most $61 billion most likely substantially less as not all consumers would opt-in to the program. In comparison, the first round of stimulus checks sent to Americans will cost $293 billion, according to the Congressional Budget Office. Moreover, because the program would operate though existing lending channels, administrative costs would be relatively low. Some may balk at having the federal government subsidize banks and double digit interest rates however, these need to weighed against the consumer benefits this subsidization would enable.
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Types Of Government Loans
Government loans serve an array of purposes. Here are five common types.
Avoid Making Poor Borrowing Choices
Seniors carry the highest credit card balances of any age group we help, many with balances of $10,000 or more. More than half carry balances over $30,000. This is credit card debt build up over a lifetime. If you have balances on more than one credit card, are using one credit card to live while making minimum payments on the other, it is time to consider the options at the bottom of the article for debt relief.
Seniors are also increasingly turning to payday loans. The problem is if this months retirement income isnt enough to pay the bills, taking out a payday loan isnt the solution. Having to pay back that loan out of your next pension cheque puts you at a loss the following month.
Pre-retirement debtors should think carefully before taking out a debt consolidation loan to consolidate credit card and other debts. A Home Equity Line of Credit may be attractive as payments are interest-only and as a result are quite low. Beware, however, that if you fail to make any refinanced mortgage payment, you are putting your home at risk. Make sure such a solution deals with all your consumer debt and that you can afford the monthly payments. In any debt consolidation scenario, dont let your credit card balances grow again.
Similarly, there has been a rise in reverse mortgages which raises concerns about the number of seniors tapping into their home equity to pay for living costs.
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How Does A Debt Consolidation Loan Work
A debt consolidation loan works just like any other type of loan. But in this case, once youve been approved youll use the money you receive to pay off any high-interest debt you have. This can be credit card debt, personal loan debt, and any other type of debt that is eligible. Keep in mind that certain types of debt, think car loans and mortgages, cannot be paid off with a debt consolidation loan.
Check out this guide on loans in Canada.
What Type Of Loan Should I Choose
Whenever you decide to borrow money whether it is to pay the bills or buy a luxury item make sure you understand the agreement fully. Know what type of loan youre receiving and whether it is tied to any collateral you own.
Also, familiarize yourself with your repayment terms: what your monthly obligation will be, how long you have to repay the loan and the consequences of missing a payment. If any part of the agreement is unclear to you, dont hesitate to ask for clarifications or adjustments.
Finally, be sure the loan repayments fit comfortably in your budget. If you over-extend yourself, the consequences can be severe.
About The Author
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Best For Tax Debt Relief: Curadebt
While other debt relief companies shy away from tax debts, CuraDebt offers special assistance for consumers who owe back taxes. This program is offered on top of its traditional debt settlement programs that can help consumers become debt-free while paying less than what they owe.
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Debt settlement programs and assistance with back taxes
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Free consultation
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In-person consultations \ only available in Hollywood, Florida
CuraDebt has been in business since 2000, and it offers a free consultation for consumers interested in its debt relief programs. Like other debt relief companies, CuraDebt also displays an array of debt settlement letters on its website, many of which show consumers who settled debts for as little as 20% of what they owed. Additionally, the company reports that its customers typically pay approximately 20% of their enrolled debt amount in fees over time. There are no monthly administration fees.
Where many other debt relief companies dont touch outstanding tax debts, CuraDebt offers specific assistance for consumers who owe back taxes and need help coming up with a plan while they manage other debts they have. This makes CuraDebt unusual in that it can help consumers who have multiple types of debt including taxes, credit cards, and personal loans.
Read the full CuraDebt review
Why The Claim Government Approved Debt Consolidation Program Is Misleading
The first thing you should know is that no government in Canada federal, provincial, or municipal officially approves any debt consolidation program. Any company making this claim is embellishing what they are selling and are doing so using a misleading claim.
What these companies mean by claiming to be “government approved” is likely one of two things:
Just because a company is licensed by the government or offers a service that is regulated by government legislation does not mean that the company or their service is approved by the government. A local restaurant needs a government license to operate, but it would be misleading for them to advertise that their food or service is government approved. Banks are governed in Canada by the Bank Act, but that doesnt mean it would be appropriate for them to start advertising that their services are government approved.
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What Practices Are Off Limits For Debt Collectors
A debt collector may not:
- Contact you at inconvenient times, for example, before 8 AM or after 9 PM, unless you agree to it.
- Communicate with you at work if you tell the debt collector your employer disapproves.
- Contact you after you send a letter to the collector telling them to stop, except to notify you if the creditor or collector plans to take a specific action.
- Communicate with your friends, relatives, employer, or others except to find out where you live or work.
- Harass you with repeated phone calls, profane language, or threats to harm you.
- Make any false claim or statement that you will be arrested.
- Threaten to have money deducted from your paycheck or to sue you, unless the collection agency or creditor intends to do so and it is legal.
