debtcare.ca

Category: Debt Consolidation

  • Consumer Proposal or Debt Consolidation – Which Makes More Sense?

    rsz_consumer_proposal_debt_consolidationIn our experience, for those looking to get rid of their debt, there is often a lot of confusion surrounding the various options available. With so many different types of debt solutions available, it can be difficult to determine which option is the best. Today, in the hopes of providing some clarification, we discuss two such options: the consumer proposal and debt consolidation.

    A consumer proposal is a negotiated settlement with your creditors. This means that you offer to repay a portion of your debts and your creditors agree in order to receive at least a portion of what is owed. There are several benefits to this option. In a consumer proposal, all debt is consolidated into a single, monthly payment, there is no interest and often the debt is reduced.  The downside here is that your credit will be impacted. That being said, if you are in a position to seek a consumer proposal, your credit has probably already been affected.

    With a debt consolidation, you borrow money to pay off all of your debt. You then repay whomever loaned you the money, with interest, with a single, monthly payment. For example, many people choose to leverage their homes by refinancing their first mortgage or taking out a second mortgage to consolidate debt. With a debt consolidation, the monthly payment will usually be larger than it would be in a consumer proposal (since you are paying back all of what is owed as well as interest), but your credit is less negatively impacted.

    Which option is best? We can’t accurately answer that question here. Every person’s situation is unique and your personal circumstances will dictate which option is best for you.

    Buyer beware – when you’re struggling with financial decisions such as these, it is best to speak with a financial consultant for guidance to eliminate potential issues.  Remember, if you go to a bankruptcy trustee, they will usually offer up a consumer proposal as the best answer because that is what they sell. If you go to a bank, they will offer a traditional consolidation because that is what they sell. A financial consultant can advise you on the best option and negotiate the process for you. There is nothing being sold, so the bias just is not there.

    At DebtCare, our goal is to help you get out of debt – that could mean a debt consolidation, a consumer proposal or any number of other options. Our priority is your financial security.

    Get in touch today by calling 1-888-890-0888.

     

  • Second Mortgage Financing for Dummies

    debt1Home renovations, a child’s education, debt consolidations – these are all common reasons why Canadians are taking advantage of second mortgage financing. If you own your own home, have significant equity and good credit – obtaining that financing is probably far easier than you may think. This week we cover some of the basics to help you.

    Second mortgage financing is a great option for people who need to finance larger sums of money. For example, a second mortgage would be great to finally finish your basement, a task which you’ve estimated at $30,000, but not necessarily to finance that family vacation to Disney World which will run you $5,000.

    Second mortgage financing is also incredibly attractive right now because of record low interest rates. Other than 1st mortgage financing, it is one of the lowest rate credit products you will find. Just remember, even though those rates are currently at record lows – that isn’t going to last forever.

    When looking at second mortgage financing there are a few important points to keep in mind. Firstly, it should be noted that,a few years ago, CMHC mortgage rules changed so the most you will likely be able to borrow against your home is 85% loan to value if you are seeking bank financing.

    Secondly, the key to a realistic second mortgage is how you structure it – amortizing a second mortgage is very important because you don’t want to stretch the debt out over 20 or 25 years. For example, you would be wise to amortize a $20,000 second mortgage to consolidate debt over 5 years. At an 8% rate payments would be less than $400 per month.

    What if your credit is a little on the shaky side? That’s ok. Even with some credit problems you can still get a second mortgage but more equity will be required and you may pay a higher interest rate.

    What to watch out for: loan shark style private lenders. Sky high fees and aggressive default clauses are two red flags that should never be ignored. A good mortgage broker is the way to go because they will deal with all lenders to get you the best deal.

    DebtCare has the knowledge and resources to get you the second mortgage financing for those big projects – at a rate that won’t break the bank. Call us today at 1 (888) 890-0888.

     

  • The Low Interest Credit Hunt– Your House is Likely the Fastest Way There

    debt22015 was not the year for many big businesses. Sinking prices for oil and other commodities took a big bite out of national income, business investment and domestic demand – and gross domestic product rose just 1.2 % in the year. Last year’s economic growth was pretty dismal – some even suggesting 2015 experienced a slight recession – and that usually doesn’t mean anything good. However, when it comes to your own hunt for low interest credit rates, it actually works in your favour.

    According to the Globe and Mail, Canada’s growth was the lowest since 2009: “Canada’s oil-battered economy in 2015 grew at less than half the pace of 2014, Statistics Canada reported, as a return to sluggish growth in the fourth quarter punctuated a disappointing year.”

    You can read more about how we entered 2016 here: http://www.theglobeandmail.com/report-on-business/economy/growth/canadian-economy-grows-at-better-than-expected-pace-in-fourth-quarter/article28962744/.

    So, we mentioned favourable results for you, but what does this have to do with your low interest credit hunt? These events triggered another: the Bank of Canada dropped interest rates to historic lows, and Canadians began using record low interest rates to finance.

    Right now, Canada’s lending rate is sitting at .5% – but this is an historic low that won’t last forever. If you are looking for low interest credit, these rates present the best opportunity to deal with things you want to finance.

    The lowest interest credit you will likely encounter will be through a mortgage. If you own your home, it makes sense to use equity to finance things like debt while rates are so low. These low interest rates can save a ton in the long run.

    In an effort to temper hot markets which some claim are inflated, this low interest rate was also accompanied by new CMHC mortgage rules, such as reducing the amounts of mortgages you can insure, reducing allowable repayment amortizations and most recently requiring larger down payments on purchases of more than $500,000. See here for more on these rules: http://www.cbc.ca/news/business/new-mortgage-rules-down-payment-1.3440797.

    If you are looking to finance, whether as a means of debt consolidation or to take on some much needed/wanted projects, now is the time to take advantage of great low rates before they go up or the government institutes more rules that make it harder to borrow.

    DebtCare has the financial options that let you take advantage and clear up your finances.

    Call us today for a consultation: 1 (888) 890-0888.

     

  • A No or Low Interest Consolidation is the Only Type of Viable Debt Consolidation

    debt2People call us all the time and tell us that they would love to pay down their debt or get rid of it altogether, but they are not quite sure of the best way to do it or even where to start. There really isn’t any one ‘best way’ that works perfectly for everyone – the best way for you depends on your situation and goals. That being said, a no or low interest consolidation is often the only viable type of consolidation.

    When you are thinking about debt consolidation to get rid of debt, here are a few of the types you may be considering:

    • Regular credit cards. This works…almost never. Why? Because credit cards are high interest – usually the highest interest of any type of consolidation product – and since debt consolidations often deal specifically with credit card debt, this option kind of defeats the purpose, no? 12% to 30% monthly compound interest makes them the most difficult to pay down, and even though using a credit card to consolidate can mean just one monthly payment, if the payment is all interest, you really are not making any inroads as far as paying off the debt.
    • Lines of credit. Although lines of credit are a popular debt consolidation option, unsecured lines of credit will often run at 8%+ interest. While this makes them less difficult to pay down, they are still not the cheapest option.
    • Home equity loans. If you have equity, these can represent a viable option, as long as the interest is low. They are easier to pay off as well. That being said, they will often run at 2% above prime or upwards, depending on credit.
    • Consumer proposals. If you don’t have equity, or have a poor credit report that makes getting any real credit an issue, these can be a great way to consolidate debt. There is no interest, often a lower balance to be repaid, and one affordable monthly payment. The trade-off is that there are implications to credit, but this option will probably result in the lowest payment and is often the best answer for people who can’t reasonably pay off their debt.

    The only way to explore all of your options for debt consolidation is to work with a company that can address any and all that are open to you.

    At DebtCare, we deal with debt. A debt consolidation may just be the answer you’re looking for when it comes to getting rid of debt. Call us today at 1-888-890-0888.

     

     

  • Back to School Blues? Consolidate Credit Cards and Stop the Interest

    The back to school season, particularly for parents, is often a very hectic time of year, especially with regard to finances. The need/desire for new school clothes, shoes and supplies often leaves parents with racked up credit cards once all is said and done – or rather, purchased. And often accompanying these credit card bills is the challenge of finding money to pay them off.

    Check out this infographic from BMO to see just what these costs add up to:

    debt1

    So, what options are available? Consolidating credit cards is a great way to reduce your debt – and often makes sense – but the type of consolidation depends on your own personal circumstances. Here are a few options that may be available to help you deal with that back to school debt.

    1. Home equity loan. By using the equity in your home, you can consolidate credit cards, thereby reducing interest and consolidating the various bills into one monthly payment. Of course, this is only possible if you own a home and have sufficient equity for this purpose. If you rent, or are without equity, this is probably not going to be a viable option for you.
    2. Consumer proposal. This is another great option, especially if your credit isn’t great or if you don’t have the security or equity for a loan. A consumer proposal will have some impacts on your credit in the short term, but this is balanced out by the fact that interest stops accumulating, there is, like a loan, just a single monthly payment, and in many cases the overall debt owing is reduced.
    3. Line of credit or loan from a lender. This is another good option, and can achieve the same things as a home equity loan: lower interest and one monthly payment. You will need to have good credit or security for this option. At the same time, this is often the most expensive option of all because it will involve higher interest than a home equity loan or a consumer proposal.

    Kids are expensive, and when back to school season rolls around, they can become even more so. Once those bills start coming in, don’t stress. Call DebtCare Canada to find out about how to consolidate credit cards and get rid of debt: 1-888-890-0888.

     

  • The Last Loan

    the last loanWe wanted to write this blog because we often see patterns regarding triggers for serious financial problems and clear points in time where different choices could have changed the course of the problem. Sure, there are instances where a sudden occurrence, such as a job loss or divorce, can cause abrupt and unexpected financial turmoil, but more often than not people build their financial problem over time.

    This is evidenced by just about every news publication reporting that Canadians are carrying a dangerously high level of personal debt. Over time debt accumulates like a snowball.

    Example scenario:

    • It only takes using those credit cards too much one month to push you into a situation where you can’t pay in full and so you make a smaller payment.
    • Eventually you have a few cards with small balances so you decide to get a line of credit to consolidate them – only you keep using the cards once you’ve paid them off.
    • Finally you decide that enough is enough – you get a consolidation loan at the bank to pay the line of credit and the credit cards.
    • You go a couple of months without using the cards but then your transmission goes. You think, well, you will only use the card once, but this means the cycle starts again…
    • A year later, you have the consolidation loan and a balance on the line of credit and a couple of credit cards.
    • You have accumulated some equity in your property, so you decide to get a second mortgage to pay off all the debt one final time. You are successful in doing so.
    • However, in the end, just like with the last consolidation loan, a few months later you begin using your cards again and a year later you find yourself making a slew of minimum payments on your credit cards.

    Now you reach a pivotal point – another loan? We say no! Let your last loan be the last loan.

    Just as Einstein said, the definition of insanity is doing the same thing over and over again and expecting different results. If you continue to refinance and restructure your debt year over year, each year owing more, you will be caught in a cycle that is not going to break unless you win the lottery or get a major raise at work (and how likely is either one of these?).

    There comes a time when one must say “self, I need to get some professional help”. Just like you may go to a therapist for a personal problem or a lawyer for a legal problem, one who continues to struggle with accumulated debt also benefits from professional guidance.

    Stop the insanity! Maybe there is a quick fix and some help with budgeting is the answer, or perhaps you have really dug yourself into a hole and need some major intervention. Either way, you are going to need to do something very different to break the financial cycle you are in.

    If you would like to make your last loan your last loan and need financial guidance DebtCare Canada can help. Call us today 1-888-890-0888.

  • Income Tax Time is Here – Preparing for the 2015 Tax Deadline

    2015 tax deadlineCanada’s income tax deadline for the 2014 tax year is right around the corner! While some anticipate refunds and are off to file with bells on, others are dreading this date and even considering not filing because of a tax debt that will follow.

    First of all, if you think you will owe, not filing is not the answer. You may think it will buy you time, but really all it will buy is penalties, interest and a bad history with CRA. If you think you will owe, be realistic about what you will owe and your ability to repay.

    Now, it is true that once you file CRA will ask you to pay the debt in full. With that said, CRA has been known to accept payment plans of up to 24 months on a tax debt. While there is no guarantee that this will happen for you, it has happened for others.

    If you took the amount of your tax debt and divided it by 24 months, would you be able to afford to repay the debt?

    If the answer is yes, the next steps you take are crucial.

    Negotiating directly with CRA can be dangerous. Before agreeing to any monthly payment arrangement they will ask for full disclosure of your assets, income, income sources, debt and more…

    The challenge here is that they may agree to payments over a 6 month period, based on a 24 month repayment, and then at the end of 6 months take the option to re-review your financial information. At this point they can reject renegotiating the monthly payments, demand payment in full and then use the information in your financial disclosure to take collection action against you.

    Another common occurrence is that when you submit an honest budget which includes your minimum obligations to other creditors, the CRA may then reject those payments and say that any surplus funds which could be directed to other creditors need to be directed to CRA. Even with all of this said, you absolutely do need to do something.

    If the answer was no…

    If you know that repaying the debt monthly, even over 24 months, is highly unlikely, you need to get some financial assistance immediately. A professional experienced with financial restructuring may be able to come up with a solution where you can repay the debt over a longer term, say 5 years.

    In either scenario…

    In either case, professional help is a necessity. Negotiating with CRA is, to be frank, too dangerous financially. Financial professionals with knowledge regarding dealing with CRA know how to navigate the bureaucracy and protect your information.

    Don’t ignore a tax debt in the hopes that it will magically disappear – it won’t. Call DebtCare Canada today: 1-888-890-0888.

  • Debt Consolidations – The Dos and Don’ts

    Debt ConsolidationsOver the last few years, debt consolidations have become a very popular form of debt relief. For various reasons, not least of which are the single monthly payments and the significantly reduced interest, debt consolidations make it easy for those struggling to maintain a hold on their finances to regain a measure of control.

    That being said, there are some definite dos and don’ts when it comes to debt consolidations. If you are considering this method as a means to fix your financial situation, here are some important things to think about before going full-steam ahead.

    Do: Talk to a professional debt consultant. For some, debt consolidation is the best option – but this will depend on a number of different factors, including the amount of debt, type of debts, and your current credit status. For example, if your credit is less than stellar, you may not be able to obtain approval for a debt consolidation loan.

    Don’t: Going with the first company you find is never a good idea. Do your research. There are a great many companies that claim to offer debt consolidations – but some are more reputable than others. Beware of those companies that require you to pay upfront and amass a small sum before any money goes to creditors. Also be wary of those with a less than stable history: if the company has only been in business for a year, it might be better to stay away. Read up on those companies you are considering. Make sure that they have a well-established, respected reputation, and the experience that means they can actually help relieve your debt worries.

    Do: Once you have decided that a debt consolidation is the right choice for your financial situation, think carefully about repayment terms. A longer term may be attractive because it offers lower monthly payments, but just remember that you will end up paying more in interest vs. a shorter term with higher monthly payments.

    Don’t: Using those cards that you have cleared with a debt consolidation is a very bad idea. For example, if you completely clear a credit card with a limit of $10,000, that doesn’t mean that you have $10,000 to spend!! Consider reducing the limits on cards you’ve cleared, and stop using these unless you absolutely have the money to pay them off as soon as you get the bill. This is a very dangerous temptation for many – so try and remove the temptation as much as possible.

    A debt consolidation can be incredibly beneficial – you just need to be careful before enlisting the services of a company that offers this service.

    DebtCare Canada has the knowledge and experience – and the reputation! We know how to help you get rid of those debts and get back on track financially. Call us today for a free consultation: 1-888-890-0888.

  • Is Credit Counselling in Canada a Debt Consolidation?

    Credit Counselling in CanadaWe have all heard the commercials on the radio and television talking about debt consolidations and credit counselling. When you have a debt that is becoming increasingly difficult to pay, these may seem incredibly enticing – but it can be difficult to know what each one means, or if they are in fact even different. So, is credit counselling in Canada the same as debt consolidation, and if not, what is the difference?

    Firstly, no, credit counselling is different from a debt consolidation. Many people confuse the two, but there are major differences. Both can represent significant debt relief, but each one requires a specific process that needs to be followed properly in order to be successful.

    Credit counselling in Canada – credit counselling is usually not for profit and is usually funded by the bank or your creditors. With a credit counselling proposal, you are essentially going to your creditors and asking to have the interest on your debt frozen and for them to accept a reduced monthly payment based on your budget. If accepted, you make one payment to credit counselling and they disperse the money to your creditors. This means a single monthly payment for you, that you can afford, and drastically increases your creditors’ chances of being paid, on time, each month.

    Some things to keep in mind with credit counselling: it does not reduce your overall debt. Although your interest is frozen and your payments may be reduced, you are still on the hook for the entire amount. Additionally, with credit counselling in Canada, the damage to your overall credit rating is the same as in bankruptcy – all ratings turn into R7 and I7 for a period of 3 years from the date the proposal is paid in full.

    Debt consolidation – A debt consolidation is when you are approved for a loan to cover the entirety of your debt. You then pay off your debt completely, and just pay that one loan on a monthly basis. With a debt consolidation, many of the same benefits are visible, such as one monthly payment and reduced interest, but without the damage to your credit.

    When you have financial challenges and you want to consolidate debt into a single payment, you have a few options, including a debt consolidation loan or mortgage financing. Other options for debt relief may include a consumer proposal or bankruptcy. You viable options will depend on a number of things, including your credit, assets, budget and cash flow, and so it always helps to speak to a debt specialist to determine all of your options.

    For more about debt consolidations and credit counselling in Canada, please contact DebtCare Canada today by calling 1-888-890-0888.

  • Debt Consolidation Through Mortgage Refinancing – The Right Choice for You?

    Debt ConsolidationWith the consumer debt levels in Canada reaching all-time highs over the last few years, money (or perhaps a lack of money) has been a common topic of conversation. As a result, debt relief is also a common subject, and it seems that no matter where you turn these days, debt reduction is the topic of the day. And one of the debt reduction solutions that is becoming increasingly popular is mortgage refinancing.

    If you are in debt and considering refinancing your mortgage to get out of it, it might be a smart choice. Many homeowners struggling with debt see mortgage refinancing as an attractive option for various reasons. Firstly, mortgage interest is usually far lower than credit card interest (one of the main types of consumer debt) – sometimes by as much as 20%. By paying off one with the other you can end up saving a ton in interest. Secondly, this works to consolidate all of those different monthly payments into one neat, tidy sum – far easier to track and pay (only past balances though, not charges made after the consolidation). It is really no surprise that mortgage refinancing seems enticing, is it?

    However, mortgage refinancing to consolidate debt isn’t the right option for everyone. Of course, if you don’t own a home, this option isn’t going to work for you. But even if you do, it may not work for several reasons. To begin with, Canadian Mortgage and Housing Corporation (CMHC) guidelines have made it more difficult than previously for homeowners to refinance. Changes to these guidelines mean that CMHC will only insure a refinance of up to 80% of a home’s value, so if your debt means that you will exceed this 80%, the option may not be the one for you. Furthermore, in order to find approval for mortgage refinancing your credit has to be in great shape. Anything less than pristine is usually an automatic no.

    If you meet the requirements and can consolidate your debt by refinancing your mortgage, then by all means, get to it! As mentioned, for some people this is the most intelligent debt reduction strategy available. However, if you are worried that your current debts will exceed the maximum amount allowed by CMHC or if your credit is less than stellar, it might be time to consider some other options. A great place to start to discuss the various solutions that would exist – and how they would work for your unique circumstances – is a debt reduction company, one that has the experience and knowledge to help you get out of debt.

    For more information about refinancing your mortgage for debt consolidation, or to find out about the other debt reduction strategies available, please contact DebtCare Canada today by calling 1-888-890-0888 or visit www.debtcare.ca.