debtcare.ca

Author: mgoldenberg@debtcare.ca

  • The 2017 Income Tax Deadline is Right Around the Corner – Will You Owe?

    The 2017 income tax deadline is looming — April 30, 2018 to be exact. Are you ready?

    There are two scenarios that can happen if you miss the 2017 income tax deadline.

    Scenario #1 —  you are owed money on your return. If you wait to file, this means you’ll have to wait longer to receive your refund — and why would you want to wait to get money back?

    Scenario #2 — You’ll owe a tax debt.

    If you owe a tax debt and miss the 2017 income tax deadline, not only will you still owe, but also that debt will continue to grow bigger the longer you wait. The Canada Revenue Agency (CRA) late filing penalty means interest builds up at an alarming rate. The CRA can begin charging compound daily interest on May 1 on any unpaid amounts owing for 2017. And then there’s the late-filing penalties.

    The CRA late-filing penalty is 5% of your 2017 balance owing, plus 1% of your balance owing for each full month your return is late to a maximum of 12 months. And if you’ve been charged a late-filing penalty in a previous year, you could be charged 10% of your balance owing, plus 2% for each full month your return is late for up to 20 months. That’s a lot of extra money to pay on top of the balance you already owe.

    So, what can you do instead?

    First, if you’ll owe a tax debt, even if you can’t pay the full balance owing on or before April 30, 2018, file your return on time. As we outlined above, if you miss the 2017 income tax deadline, you’ll only be subject to more fines and penalties, which doesn’t help anyone.

    Second, you’ll have to deal with the tax debt itself. Even when you file on time, you’ll still need to pay the tax debt. If you can pay it off in full when you file, do that. This will solve the problem before it starts and is the ideal scenario.

    If you file, but don’t pay the debt, the CRA will levy collection action against you, which could include a frozen bank account, wage garnishment, and even a lien on your property or other assets. It is in your best interest to pay your tax debt, even if you need to look into financial options to afford it.

    Remember, filing your taxes late and not paying your tax debt are two of the worst things you can do for your financial standing. There are better options available that can help you meet the deadline and make your payments.

    If you’ll owe a tax debt, but can’t afford to pay, DebtCare Canada can help you assess your options. Contact us for a free consultation before the 2017 income tax deadline by calling 1-888-890-0888 or visit us online at www.debtcare.ca.

  • Mortgage Refinance vs. Consumer Proposal: What Makes More Sense When You Own a Home?

    Many Canadians are struggling with debt and with the Bank of Canada interest rates increasing that struggle may become even worse as time goes on. However, there are options available for debt consolidation — particularly if you own your own home.

    If you are a homeowner, a scenario you may have considered to manage your debt is a mortgage refinance. But there’s another option that more Canadians are choosing than ever before — a Consumer Proposal. If you’re struggling with debt and own a home, what’s the better option — a mortgage refinance or a Consumer Proposal? We’ve got the details to help you decide.

    1. Mortgage Refinance

    We’ll start by defining what exactly a mortgage refinance is. Some confuse a mortgage refinance with a second mortgage, but it isn’t the same thing. A mortgage refinance is the process of replacing your existing mortgage (or mortgages) on your property with a new mortgage, generally with different terms. For example, say you have a mortgage of $200,000 with Lender A at a 7 per cent interest rate, but you discover that you can refinance your mortgage with Lender B for $200,000 at a 5 per cent interest rate. You can use the loan from Lender B to repay Lender A and then continue to pay back Lender B at a lower interest rate, saving you money over the long run.

    You can also use a mortgage refinance to pay off debts, provided you have enough home equity available. Let’s say you had that $200,000 mortgage loan from Lender A at 7 per cent and also had $20,000 in credit card debt. You then find out you can get a loan from Lender B for $220,000 at an interest rate of 5 per cent. So, you pay back Lender A and you pay off your credit card bills and then continue to pay back Lender B, again at that lower interest rate. Now you only have one debt to pay off and will again be saving more money over time.

    1. Consumer Proposal

    A Consumer Proposal is an offer to your creditors to reduce your debts. For example, if you owe $50,000 in debt, a Consumer Proposal may offer $15,000 to your creditors to satisfy your debts, provided you can prove that you don’t have the ability to pay in full. If your creditors accept your Proposal, you can then proceed to make a single payment over an interest-free term of up to five years. In order to qualify for a Consumer Proposal, you need to have debts exceeding $8,000 but not more than $250,000 and you must demonstrate the ability to be able to repay a portion of your debt. Unlike a bankruptcy, a Consumer Proposal can be paid in full at any time. However, a Consumer Proposal does affect your credit score. Consumer Proposals are administered by Licensed Insolvency Trustees, who have a legal obligation to maximize the return for your creditors and get paid a portion of what you pay. Get your own financial advice by speaking to an independent financial firm, such as DebtCare Canada.

    1. Mortgage Refinance Consumer Proposal

    Now that you know the difference between a mortgage refinance and Consumer Proposal, how can you decide what the best option is for you?

    The first consideration can be how deep in debt you are. If you have a significant amount of debt, but don’t have the equity available in your home, a Consumer Proposal may be the option for you as a mortgage refinance wouldn’t allow you enough money to get your head above water.

    A Consumer Proposal is advantageous when there is more debt and less equity whereas a mortgage refinance is favourable when there is more equity available. Also, credit plays a role in your ability to refinance a mortgage. If you are loaded in debt, have been making late payments, and/or have bruised your credit, that will have to be resolved before many lenders will look at you for a mortgage refinance – unless you have more than 20 per cent equity.

    If you’re not sure whether a mortgage refinance or Consumer Proposal is right for you, or want to explore more debt consolidation options, DebtCare Canada can help. We perform an independent review of your financial situation and make practical financial recommendations that will work for you.

    Call us today at 1-888-890-0888 or visit www.debtcare.ca to take a free, online assessment.

  • How to Combat New Mortgage Rules and Interest Rate Increases

    The past year has been a rocky one for Canadian homeowners. The Bank of Canada announced interest rate increases starting in July of 2017. Since then, the interest rates have increased three times, going from 0.5 per cent to 1.25 per cent. While all this was happening, Canada’s new mortgage rules also came into effect, starting January 1, 2018. These rules add an additional stress test onto uninsured mortgages (those with a down payment higher than 20 per cent) and also put added restrictions onto lenders.

    If you’re a homeowner, or were already struggling with debt, it can seem like a lot to take in all at once. Your financial security can play a large role in your well-being and if you don’t know your financial position or aren’t sure what to do about the interest rate increases or new mortgage rules, it’s understandable. However, there is a way that you can combat these changes and come out financially stronger.

    Let’s start by looking at the new mortgage rules. These are most likely to affect you if a) you’re a new homebuyer, or b) you are up for mortgage renewal or are considering mortgage refinancing.

    If you’re planning to buy or refinance a house, the new mortgage rules could mean that you have to spend less, even with a down payment of more than 20 per cent, if you’re going through a federally regulated mortgage lender.

    If you’re up for a mortgage renewal or considering a mortgage refinancing, it could also mean that you’ll be subject to the same “stress test” and other lender regulations, too — particularly if you were to switch to a different federally regulated lender.

    Under the new mortgage rules, lenders are encouraged to look at more than just the loan-to-value ratio (LTV), which is the amount of the mortgage lien divided by the appraised value of the property. Lenders will also be looking at two other factors — your gross debt service ratio (GDS) and your total debt service ratio (TDS). The GDS is the percentage of your income needed to pay all of your housing-related costs, including the mortgage, taxes, and utilities. Your TDS is the percentage of your income needed to cover all your debts. This can include student loans, lines of credit, credit cards, and more.

    This is where the interest rate increases come in. If you are carrying a large amount of debt, your GDS and TDS will likely be affected as you may be paying more in interest on the amount owing.

    The way to combat both the new mortgage rules and the interest rate increases then is to assess your debt levels. Take stock of your finances: how much debt do you carry? How close to the limit are you with your monthly payments? How far away are you from being unable to manage? Once you know the answer, you can create a plan to make sure that you are in a secure financial position.

    If your debt is seeming overwhelming and that pain point is looming too close for comfort, there is help available. A debt consulting organization, such as DebtCare Canada, can help you assess your situation and find the financial solutions that are right for you.

    If you’d like to buy a house or are up for mortgage renewal, another option you can take is to explore other lender routes besides the federally regulated big banks. DebtCare Canada offers competitive financial programs to help people no matter their credit or income.

    Call DebtCare Canada to find out more at 1-888-890-0888 or visit www.debtcare.ca.

  • What the Bank of Canada Increase Means for Mortgage Interest Rates

    If you’re reading this blog, you likely already know that the Bank of Canada interest rate increased again on January 17, 2018, going up to 1.25 per cent. You likely also know that the Bank of Canada (BOC) interest rate hike affects all forms of debt — credit card, student loans, and, of course, mortgages.

    But what you may not know is just what the BOC increase means for your mortgage interest rates. That’s where we come in.

    Exactly how much the BOC interest rate increase will affect your mortgage depends on several factors. The first of these factors is what type of mortgage you have.

    There are two types of mortgages: fixed-rate and variable-rate. Fixed-rate mortgages have a standard payment that is made every month. The payment amount stays the same for the duration of your loan agreement and you always know what you will pay and when. For those who already have a fixed-rate mortgage, the BOC interest rate hike likely won’t affect you unless it’s time for you to refinance your mortgage (more on that in a minute).

    The second type of mortgage is the variable-rate mortgage. This is the mortgage type that is most immediately affected by increasing interest rates as the amount you pay monthly changes based on current interest rates. So, if you have a variable-rate mortgage and the BOC interest rate goes up by 0.25 per cent, your mortgage interest rate will be going up by 0.25 per cent. If you have a variable-rate mortgage, you may want to consider locking into a fixed-rate term instead. It’s still up for debate among economists how much money switching to a fixed-rate mortgage will save over the long run, but if interest rates continue increasing (which the BOC governing council has said they likely will) switching could result in bigger savings and, at the very least, a lot less stress.

    There is, however, a scenario where a fixed-rate mortgage could still be affected by the increasing interest rates: mortgage renewal. When the BOC interest rate increases, banks follow by raising mortgage interest rates, so if you are renewing your mortgage, you may be affected by the increased interest rates. Canada’s new mortgage rules also affect mortgage renewals. If you’re renewing or refinancing your mortgage, you may be subject to a stress test to make sure you can afford your mortgage. One way you can prepare for the stress test is to create a cushion in your savings and budget to ensure you can afford these slight increases.

    The combined interest rate increases and new mortgage rules could make it more difficult for potential homebuyers to purchase a house and obtain a mortgage from traditional big banks. There are other options available, though.

    At DebtCare Canada, our financing programs offer financial help to people with all types of credit and income. When the bank says no, we say yes. We can help with first mortgages, second mortgages, home equity lines of credit, and more, even for those with bad credit. Learn more about our competitive financial programs by calling 1-888-890-0888 or visiting www.debtcare.ca.

  • Consumer Proposal vs. Refinancing Your Mortgage – Which is Better for You?

    If you are like the many Canadians facing overwhelming amounts of debt, you may be considering a consumer proposal vs. refinancing your mortgage to help ease the pain. Maybe you’re wondering how a second mortgage vs. consumer proposal stacks up? That’s what we’re here to help you find out.

    In this week’s blog, we’ll compare making a consumer proposal vs. refinancing your mortgage. Let’s start by examining the key differences:

    Mortgage refinancing:

    • preserves your credit
    • provides a low consolidated monthly payment
    • may eliminate payments to debts completely
    • offers low interest
    • repayment timeline can be shortened or lengthened
    • allows you to take out cash that can be used to spend, invest or pay other debts
    • enables you to move from an adjustable to a fixed-rate mortgage

    In some cases, you may be able to pay your home off more quickly than you would have under your original mortgage. Mortgage refinancing to consolidate debt uses your home equity to pay debt. People choose this option because of the flexibility and the possibility of a lower interest rate and more manageable monthly payments.

    A consumer proposal:

    • stops interest from accruing
    • stops any wage garnishments immediately
    • stops creditor calls immediately
    • can be repaid over as many as 60 months to lower your monthly interest free payment
    • allows you to keep your car, tools, and other personal belongings
    • eliminates all debt, including tax debt, with a few exceptions
    • while it impacts your credit negatively in the short term, this has likely already happened if debt has become unmanageable, and gives you the chance to rebuild more quickly.

    Unlike refinancing, a consumer proposal is a legal solution and can only be administered by a Licensed Insolvency Trustee (LIT).Something to keep in mind about LITs: they are administrators who earn money based on the size of the proposal negotiated. They are court-appointed officers who do not represent you. They have a job to ensure that you make a proposal that is a win for your creditors. This can be confusing because many LITs market solutions as though they represent you. The truth is that they work for your creditors as much as they work for you, meaning you aren’t protected.

    So how do you choose between mortgage refinancing or a consumer proposal? If you have enough equity to refinance your mortgage, then you may not be a likely candidate for a consumer proposal. If you have enough equity that if you refinanced you could pay a portion of your debt, then an informal settlement negotiation with your creditors using the proceeds of your mortgage refinance could be the answer.

    However, if you don’t have enough equity, don’t own your own home, or have less than stellar credit history, a consumer proposal might be the better option.

    Whatever your situation, if you are looking for a solution to your debt problems, such as considering a consumer proposal vs. refinancing your mortgage,start by consulting an experienced financial consultant, one who will discuss all the financial options available to you, outline the pros and cons, and help you pick the best plan that suits your needs.

    Call DebtCare today to discuss your options. 1 (888) 890-0888.

  • BOC Interest Rate Jumps to 1.25%

    Higher interest rates for Canadians are continuing in 2018. On January 17, 2018, the Bank of Canada (BOC) announced an interest rate increase to 1.25 per cent. The BOC interest rate affects all forms of debt, including student loans, home equity lines of credit, credit cards, and more.

    The strong economy, job growth, and business investments were all cited as reasons for the January increase.

    The first BOC interest rate increase came in July of 2017, taking the rate from 0.5 per cent to 0.75 per cent. The second increase happened in September of 2017, going up to 1 per cent. The January announcement is the third increase; however, more are expected to come in 2018.

    “While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target,” the BOC said in a press release.

    The BOC isn’t the only one increasing rates. After the BOC announcement, Canada’s major lenders are raising their prime lending rates, which will affect variable-rate mortgages, home equity lines of credit, and personal loans.

    The BOC acknowledged Canada’s record-high household debt, but said that it predicts consumer spending will go down with increased interest rates and new mortgage rules.

    The next BOC interest rate increase is scheduled for March 7.

    Does the BOC interest rate increase have you worried about your debt levels? Higher interest rates can make outstanding debt that much more difficult to pay off. But there is debt relief available.

    One of the best ways to find debt relief is to work with a qualified financial professional to know your options and make the wisest choice. DebtCare has debt relief programs that can help you cope with this BOC interest rate increase and any future ones, too.

    Call DebtCare today at 1 (888) 890-0888.

  • Consider Consolidating Debt Before Canadian Interest Rates Go Through the Roof!

    The interest rate may go up again – are you prepared?

    If not, it may be time to consider consolidating debt before this happens. It’s been all over the news that the Bank of Canada (BOC) recently announced a significant increase in Canada’s prime interest rate. A strong Canadian economy was one contributing factor in this decision. And, if it does continue to perform well, which hopefully it does, raising rates may just become a trend. If you’re carrying a mortgage and other debt, it may be time to find out how to consolidate debt.

    A hike in interest on mortgages for the average Canadian family could have long-term impacts in the hundreds of thousands of dollars they may currently carry in debt. Consolidating debt may help offset that increase because every slight increase can result in additional monthly payments of hundreds of dollars each month. According to a 2016 TransUnion report, more than 250,000 Canadian credit consumers might find themselves in financial trouble if rates rose by 1%.

    If you own a home, now is a good time to look long and hard at your debt and examine how you can use any existing equity to reduce interest rates on your other debt payments.

    While demand is still high for Canadian real estate, increased interest rates could eventually slow this demand, and that could severely impact the value of your property. It may end up eliminating the equity you need to refinance and consolidate your debt.

    Here are some options to consider:

    • Mortgage financing: This usually means taking out a second mortgage in addition to the one you currently have.
    • Personal loan/line of credit: This means going to a bank or private lender to take out a personal loan or line of credit to consolidate. This often isn’t an option for those with debt problems or bruised credit.
    • Consumer Proposal: This involves a plan for one payment with no interest that stops collection action, reduces debt and requires a lower monthly payment.
    • Bankruptcy: This is a one-payment option with no interest which stops collection action and gives you a fresh financial start.

    There are pros and cons to all the debt consolidation options, and the one you choose to get your finances settled and reach financial stability will be decided by your circumstances and financial goals. A financial consultant with experience helping people get back in good financial shape is the best place to start. They have the knowledge and expertise to help you set a plan to meet your goals with consolidating debt.

    At DebtCare, we’re here to help you achieve financial freedom. Call us today at 1-888-890-0888.

  • The Taxman Taketh Away: How to Reduce Crippling CRA Penalties

    CRA penalties and interest can be crippling and even double the size of a tax debt. We’ve all heard horror stories about the CRA and its efforts to enforce repayment. If you are facing Canada Revenue Agency (CRA) penalties, then you need to determine how you are going to reduce that burden in a way that works for you, not the CRA.

    Yes, the CRA does offer some programs that remove penalties and interest, such as:

    1. The Taxpayer Relief Program – intended to provide relief of penalties and interest to those who can prove that an extraordinary circumstance led to their tax problem.
    2. The Voluntary Disclosure Program – offers a second chance to change a tax return you previously filed or to file a return that you should have filed.

    Keep in mind that these are complicated programs to apply for. Furthermore, where relief is concerned, it is difficult to get CRA approval for even partial relief of penalties and interest.

    Even if CRA agrees to cancel some or all your penalties and interest, you will still be left with a tax debt. Plus, the CRA never makes settlements on tax principal.The only question at this point is: can you pay the tax debt? If you can, then pay it.

    If you cannot, then the problem is a much bigger one.The CRA will collect one way or another, there is no way around that fact.

    The only way that you can get rid of CRA penalties, interest, and potentially reduce the principal tax debt you owe is through a consumer proposal or bankruptcy. Both will also protect you from disastrous enforcement action or stop it if it has already been put in place.

    When exploring either option, keep in mind that consumer proposals and bankruptcies must be administered by a Licensed Insolvency Trustee (LIT). Why is this important? Because LITs do not represent you. They represent your creditors, and therefore will be doing everything they can to collect the most for the creditors. Once you share your personal and financial information with an LIT, they may be able to find ways to go after more of your money and assets.

    Protect yourself and your information by always seeking out your own professional financial advice to explore all your options before going to a LIT.

    At DebtCare, we want to help you become debt free.

    Get in touch to discuss the best option for you by calling 1-888-890-0888.

  • The Difference Between Financial Consulting Companies and Debt Settlement Companies

    The number of debt settlement companies in Canada seems to have risen dramatically over the past five to 10 years. With more and more Canadians finding themselves struggling with debt, it’s a sign of the times that companies offering debt relief have increased in number. In this post, we’ll focus on what to look for when it comes to legitimate debt relief versus going to one of the many debt settlement companies out there.

    Many people are signing up for debt settlement programs because of the way the companies almost guarantee an easy way out of debt problems. However, there are several problems with this option, especially when the debt settlement company you choose is not completely open and honest, or less than reputable. In this case, you could easily end up with more problems than you started with.

    For years, warnings have been issued by consumer protection agencies and governments alike about the perils of working with these operators. Debt settlement companies claim to negotiate with creditors on behalf of consumers and arrange payment schedules or settlements. The typical debt settlement company’s solution involves you paying them money monthly (instead of your creditors) and then when they have enough they will endeavour to make a settlement with your creditors.

    The problem is that many of these companies ask for money up front and you must pay fees to the companies for their services. Unfortunately, there have been many instances reported where consumers have paid into debt relief programs only to have the company disappear overnight – with their fees, but no results. Furthermore, putting off paying your creditors in exchange for paying these companies can severely damage your credit.

    Some other alarming facts to consider about debt settlement companies:

    • They only have success rate on average no higher than 10%.
    • Fees paid can often be equal to or exceed the amount you owe.

    Due to the rise of unscrupulous behaviour of several debt settlement companies, the federal government has posted a consumer alert that reminds consumers of the dangers of working with these organizations. You can read more about the federal government’s warning here: https://www.canada.ca/en/financial-consumer-agency/services/debt/debt-help/alert-debt-credit-repair.html

    If you are in a financial pickle, your best choice is working with a professional debt consultant. They will work to protect your best interests when developing debt relief solutions. Here are four reasons to work with an independent financial professional:

    1. They provide impartial advice on a range of solutions.
    2. They do not charge up-front fees and will first propose a realistic plan that suits your specific needs.
    3. They can help with complex issues such as tax debt, or other financial situations that may involve enforcement action.
    4. Along with consulting services, they offer financial advice, such as budgeting and relief programs, to help you explore all your options to becoming debt-free.

    Your financial situation is unique and different from everyone else’s situation. Hiring a good financial consultant or adviser who will work with you to develop a solution tailored to your circumstances is the best way to start on the path to fixing your finances.

    At DebtCare, we put your needs first. Before you start calling debt settlement companies, call us today for a consultation at 1 (888) 890-0888.

  • How to Build Great Credit – A Plan for 2018

    Happy New Year everyone! If you are like the thousands of other Canadians out there with a New Year’s resolution to become financially fit, this blog should help, especially if you need to work specifically on your credit. There are certain steps to take if you want to learn how to build great credit. If it’s time to plan to get out of debt and learn how to fix bad credit, read on!

    Here are some tips to fix your credit:

    • Always start by requesting your credit report from Equifax and TransUnion. It is important to know your current situation and where you stand credit history-wise in order to set a goal to reach a better rating by the end of 2018.
    • Set a budget – know what you have available to spend, what you need to spend it on, and where you have room.Whatever is left over, use it to pay down your debt and build your savings up.
    • Start paying down your cards one by one.
    • Once you get there, try to keep your cards at only 50% of their credit limits.
    • Always make more than the minimum monthly payments.
    • Settle collection debts – often you can make settlements with collection agencies if you will pay the settlement amount in full.
    • Send the credit reporting agency proof of any major developments like paying off a major account or a settlement to ensure that your report is updated.
    • Only borrow what you can afford.
    • Stay away from payday loans at all costs – they don’t build credit and can become a major problem very quickly.

    It can take years to build great credit and a high credit score, and you can just as easily blow it in six months. If your debt is manageable, you can start paying down each creditor, such as each of your credit cards, one at a time. You can also look at your assets to see what you can use to consolidate your debt. However, if your debt is unmanageable, you will need to seriously consider financial alternatives.

    Re-building your credit can be a long process, but if you make the resolution to stick with and build great credit, you can improve your rating and restore your financial situation.

    At DebtCare, we can help you determine the best financial solution to your debt situation.

    Call us today at 1 (888) 890-0888.