debtcare.ca

Category: Get Out of Debt

  • Facing Bankruptcy During COVID-19? There are Other Options too.

    If you are faced with tough financial decisions, bankruptcy can seem like the option that will reduce the burden of debt.

    As Bankruptcy Canada puts it, in simplest terms, in personal bankruptcy, you assign everything you own to a Licensed Insolvency Trustee in exchange for the elimination of your debts.

    While many individuals and companies file for bankruptcies, particularly during financial crises, bankruptcies come with their own challenges.

    To begin with, bankruptcy is expensive and can have personal implications if the debt carries director’s liability – such as unpaid source deductions and GST/HST liabilities.

    Also, when you file for bankruptcy, the trustee involved does not represent you. The trustee is an impartial court appointed officer, who has to look out for both your and your creditors’ interests. So, it is always recommended to work with a debt consultant, who can support you through the process.

    Lastly, bankruptcies are likely to cause your credit score to drop to the lowest possible rating at most Canadian credit bureaus.

    This is why it is important to evaluate other options available to you as well.

    Some of these options can not only help you retain your assets but also save your credit rating.

    Mortgage refinancing, for instance, is a popular way to get out of debt.

    When you’re looking to reduce your debt load, having equity can be incredibly beneficial. If you own a home, you can use available equity to consolidate your debts into one payment. This is an effective way to quickly deal with high-interest debt while managing your budget and minimizing the negative impact on your credit score.

    When you have to make one fixed payment on a fixed schedule, it is easier to keep track of what you owe.

    Additionally, given the all-time low interest rates, you could save money on your monthly mortgage payments if you bought your home at a time when interest rates were higher.

    If you do not have home equity, consumer proposals can be a viable option especially when you are facing collection action and have unsecured, non-mortgage debts between $8,000 to $250,000.

    It is a proposal made to your creditors, where your creditors agree to accept a single payment representing a percentage of your overall debt, that you repay monthly, normally over a term of 5 years.

    This helps in consolidating your debt, preventing collection action, and protecting your assets.

    While your credit score does take a hit after you file for a consumer proposal, this is usually temporary. Two years after your proposal is paid in full, your credit score can bounce back.

    Deciding what works for you depends on the level of debt you need to pay off, the worth of your assets, and your current financial standing.

    At DebtCare, we review all these aspects and propose a plan of action that helps you eliminate your debt on terms that are favourable for you. So, if you’re facing insolvency, contact us today for a free consultation on 1-888-890-0888 or visit www.debtcare.ca.

  • Pros and Cons of Refinancing Your Mortgage to Get Out of Debt

    Mortgage refinancing is a popular way to get out of debt, but is it the right option for you?

    During the ongoing COVID-19 pandemic, you may be looking for ways to reduce your debt load. If you own a home, you can use available equity to pay down your debts. Read on for the pros and cons.

    Pros

    • Refinancing your mortgage allows you to put debts into one payment.

    This can give you more freedom in your budget as you will have a fixed payment on a fixed schedule — so you will know exactly what you owe and when.

    This is an effective way to quickly deal with high-interest debt while managing your budget.

    • It lets you keep your house (unlike some cases of filing for insolvency).

    In some cases, filing for bankruptcy or a consumer proposal puts your assets — like your house — at risk.

    With a mortgage refinancing, your home is safe so long as you meet your payments.

    • You could save money if you get a lower interest rate.

    If you refinance for a lower mortgage rate, you could save money on your monthly mortgage payments if you bought your home at a time when interest rates were higher.

    • It doesn’t harm your credit score (at least not immediately).

    When you file for bankruptcy or a consumer proposal, your credit score takes an immediate hit and you are left with a low rating for five-to-seven years.

    With mortgage refinancing, however, that doesn’t happen. In fact, if you are using the equity to pay off high-interest debts, like credit cards, your credit score could go up!

    The caveat here is that if you default on your mortgage or miss a payment, your long-term credit score could still be affected.

    Cons

    • It could restart your amortization schedule.

    If you were five years into a 25-year mortgage term and decided to refinance, your term would reset to 25 years. This means you would be paying your mortgage for an extra five years.

    While you would be paying mostly interest for the last five years, it will be longer until you are mortgage-free.

    • You might get a higher interest rate.

    Depending on when you bought your house, your mortgage rate could actually go up.

    • You will have less equity to access later.

    By taking out equity now, it may be harder to access later (at least through a refinancing) and you’ll have to wait for it to accumulate again.

    • It may not be possible if you’re carrying too much debt.

    Like getting a mortgage to begin with, you have to qualify for a refinancing. If you’ve lost your income, your credit score is low, or you’re carrying too much debt, you may not qualify.

    (If this is the case, talk to a debt counsellor – they can help you clean up your finances so you can qualify.)

    • You may have to pay closing costs.

    Mortgage refinancing typically comes with closing costs and other fees. These numbers could affect your decision.

    • If you’re breaking your current mortgage term, it might not make financial sense.

    Breaking your current term early can come with additional costs.

    If mortgage refinancing won’t work for you, there may be another option that does, such as taking out a second mortgage, a home equity line of credit (HELOC), or another debt consolidation method.

    Whatever method you choose — refinancing or not — the important thing to keep in mind is that it will work so long as you keep your finances under control. Debt consolidation isn’t an invitation to start buying more. You need to have a plan for how to manage your money after refinancing (or your chosen debt management method) too.

    At DebtCare Canada, we can help you do both — explore options to deal with debt and create a plan to stay debt-free for good.

    We offer first mortgages, second mortgages, HELOCs, and more.

    Contact us today for a free consultation. Call or text 1-888-890-0888 or visit www.debtcare.ca.

  • Get Debt Help Without Leaving the House – Here’s How

    In the past, before the novel coronavirus (COVID-19) people might have gone to see a financial consultant in person for debt help or otherwise, but with social distancing in effect, that is not advised right now unless absolutely essential.

    However, debt help is more necessary than ever right now. The impact of COVID-19 has left many Canadians out of work and struggling to pay bills.

    A report from the Canadian Centre for Policy Alternatives warns the unemployment rate could rise to 13.5%, the highest level since the Second World War.

    In one week, more than 500,000 Canadians applied for employment insurance (EI). The government is also expecting more than 4 million applicants for the recently announced Canada Emergency Response Benefit (CERB).

    While some government help is available — such as emergency caregiver assistance and a wage subsidy for eligible employers — these programs are still rolling out and there may be a waiting period to receive funds. And for many, the assistance provided may not be enough to get by.

    Dealing with Debt to Free Up Finances

    Debt payments take up a large chunk of Canadian budgets. According to Equifax Canada, the average Canadian carries $72,950 in debt. $23,800 of that is non-mortgage debt (which includes credit cards, loans and lines of credit).

    Even carrying a little bit of debt can stretch your budget, especially when your income is reduced. Do you want to be putting your limited income towards credit card payments?

    When every penny counts, it’s better to make that money work for you — instead of using it to repay past expenses.

    The time to deal with debt is now, particularly if you have been laid off or your income has been affected by COVID-19 or otherwise.

    While everyone is frightened and worried (and rightfully so), the current situation and loss of income will allow people to get much lower deals on their debts as their income has been reduced. Most creditors will be accepting any reasonable offer.

    If you wait until your income has returned, the opportunity to have your debt reduced to the same extent will be gone.

    How to Get Debt Help Online

    The key to getting debt help online — without leaving your house — is knowing what you are looking for.

    You want to find:

    • A debt consultant that has an established reputation (meaning you can trust their services — this is especially important when you cannot visit their offices due to social distancing).
    • A debt consultant that works in your part of the country or nationally.
    • A debt consultant set up for remote access — with social distancing, you shouldn’t have to go into an office.
    • A debt consultant that will review all your options.

    We can only speak to our services at DebtCare Canada, but we provide exactly that. We’ve helped thousands of Canadians deal with their debt and get their finances back on track.

    We act solely in your interest to ensure that you get the best possible results by utilizing federal government programs and other financial solutions to help you deal with your debt with dignity.

    Our reputation is trusted and secure. We operate nationally and remain fully functional during the COVID-19 pandemic through remote operations.

    How to Contact DebtCare Canada Remotely:

    We know this is a stressful time and we want to assure you that DebtCare is here for you. If you are struggling, please reach out. 

    You can also follow us for regular information related to dealing with your finances during COVID-19 and beyond. DebtCare is on Twitter, Facebook, and LinkedIn.

    Learn more about our services at https://debtcare.ca/.

  • COVID-19 Income and Debt Help for Canadians

    The past two weeks have been a non-stop train of breaking news as Canada copes with the novel coronavirus, COVID-19.

    This public health pandemic is affecting many across the country — both medically and financially.

    In order to “flatten the curve” and reduce the risk of infection, many businesses and public services have been suspended, including in some provinces:

    • Public and private school closures.
    • Daycare closures.
    • Eat-in restaurant closures (take-out and delivery are still available).
    • Temporary closure of non-essential businesses, such as clothing retailers.
    • Temporary closure of public event spaces, such as movie theatres.
    • The list goes on…

    While all of these measures are meant to reduce COVID-19 risk and pressure on our healthcare systems, it has created another challenge: financial difficulties.

    Many Canadians are now out of work, or unable to work due to the need for childcare or caring for those who are ill. While some are working from home, not everyone has that opportunity.

    Businesses are also feeling the loss of income, and some have had to lay off employees temporarily.

    While public safety is essential, there is no denying the challenge this has had on the Canadian economy — and that’s where emergency relief comes in.

    Emergency Response Package

    On March 18, 2020, Prime Minister Justin Trudeau announced an economic aid package of $82 billion. This includes:

    • A temporary boost to Canada Child Benefit payments.
    • A new Emergency Care Benefit of up to $900 biweekly, up to 15 weeks, to provide income support to workers who have to stay home and don’t qualify for paid sick leave or employment insurance (EI). This includes those who are self-employed.
    • A new Emergency Support Benefit to provide up to $5 billion in support to workers who are not eligible for EI and who are facing unemployment.
    • A six-month, interest-free reprieve on student loan payments.
    • The income tax deadline has been extended to June 1, 2020 and taxpayers can defer tax payments until August 31.
    • And more.

    Mortgage Payments Deferrals

    The Big 6 Banks announced on March 17 and 18 that they are taking measures to support customers on a case-by-case basis to provide solutions, including up to a six-month payment deferral for mortgages and the opportunity for relief on other credit products.

    This is meant to help those who are facing challenges due to COVID-19, such as pay disruption, childcare disruption, or illness.

    Customers are encouraged to reach out to their lenders to ask what assistance there is for them.

    Bank of Canada Interest Rate

    On March 13, 2020, the Bank of Canada announced an emergency interest rate cut to 0.75% — the lowest that it has been since 2017.

    “It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for Canada’s economy,” the Bank said.

    The next Canadian interest rate announcement is scheduled for April 15, 2020. Economists are predicting the interest rate will be cut again.

    The lower interest rate means that credit is easier to secure — and is especially helpful for variable-rate debts, such as variable-rate mortgages, credit cards, or unsecured lines of credit.

    Putting It All Together — and Dealing with Debt

    Let’s talk for a moment about the impact of all of this. While these are good measures temporarily, we must acknowledge that they are not necessarily long-term solutions.

    For people relying on a certain amount of income to meet their bills, $900 biweekly is likely not enough to cover their expenses.

    And then there is the matter of deferrals — whether that be deferring mortgage payments, student loans, income tax payment, or otherwise.

    These payments will still need to be made eventually. Some of the details have yet to be confirmed, but consumers need to be aware that these payments are not just disappearing. These methods are meant to give you time to get the money together, when hopefully the economy is recovered, along with public health.

    But (and there is a big but) the money will still be owed. You will still need to find the funds.

    If you are currently earning less than you usually make due to COVID-19, or have a hard time meeting your bills regardless, other measures may need to be taken to get your finances on track.

    These might include:

    • Creating a budget and tracking expenses.
    • Avoiding taking on more unnecessary debt, such as charging expenses to your credit card.
    • Consolidating debt payments and paying off high-interest debt.
    • Filing for insolvencies, such as bankruptcy or consumer proposal.

    Take the time now to make a plan for your finances during the COVID-19 pandemic. If you are on the brink, contact a debt counsellor today.

    Debt can weigh down your lifestyle, particularly when money is tight. If you have $10,000 in credit card debt, those payments can take away from your ability to pay the mortgage or rent, buy groceries, or pay utility bills. When every dollar counts, you don’t want any more than necessary going towards your debt payment.

    At DebtCare Canada, we remain available by phone, text, or online across the country. We will talk through your financial options with you and help you find the best path forward for your unique situation during the COVID-19 pandemic or otherwise.

    Contact us for a free consultation. Call or text “Help” to 1-888-890-0888 or visit www.debtcare.ca.

  • Consumer Proposal vs. Bankruptcy – We Break It Down

    Consumer proposal vs. bankruptcy – what is the difference, and which one is the best choice for you? If you want to find out the answer, read on!

    For Canadians struggling with debt, both filing for a consumer proposal and filing for bankruptcy can be a way out. But how can you tell which one is right for your situation? We’re breaking it down.

    We’ll look at:

    • What is a consumer proposal?
    • What is bankruptcy?
    • Consumer proposal vs. bankruptcy – main differences
    • Bankruptcy or consumer proposal – which one is best for you?

    Consumer Proposal

    A consumer proposal is a form of insolvency filing where you make a settlement offer to your creditors. That’s where the name comes from — it is a proposal to creditors from you, the consumer.

    In your proposal, you offer to settle your debts for less than you owe, but more than your creditors would receive if you filed for bankruptcy, instead.

    The majority of your creditors must accept your proposal for it to be approved.

    Generally in a consumer proposal, your assets are not sold off to pay your debts. A consumer proposal is only available for unsecured, non-mortgage debts between $8,000 to $250,000. If you are carrying more debt than that, you might consider another type of proposal, or filing for bankruptcy. You also must be able to demonstrate your ability to repay a portion of your debt.

    Bankruptcy

    In personal bankruptcy, you assign your assets in exchange for the elimination of your debts. Every province has certain exceptions for what you can keep but, depending on the amount of debt you owe, some assets may be sold.

    You can file for bankruptcy if you owe at least $1,000 and are not able to pay your debts. Bankruptcy only deals with secured debts, such as personal loans, credit cards, and tax debt. It doesn’t erase most secured loans, such as a car loan or mortgage, although those assets may be repossessed if you cannot meet those payments.

    To be discharged from a bankruptcy, you must meet a schedule of payments, set out by a Licensed Insolvency Trustee.

    Consumer Proposal vs. Bankruptcy – Main Differences

    Filing for a consumer proposal and for bankruptcy are two different things. The main differences are:

    • In a consumer proposal, you can only file if you owe less than $250,000 in non-mortgage debt. In a personal bankruptcy, there is no limit.
    • A consumer proposal must be accepted by the majority of your creditors. A bankruptcy does not need approval.
    • Filing for a consumer proposal leaves you with an R9 rating on your credit report while you are in the proposal; it is upgraded to an R7 once it is paid off. The R7 stays on your credit report for three years after completion.
    • Filing for bankruptcy leaves you with an R9 credit rating while in the bankruptcy and for seven years after it is discharged (it is never upgraded to a better rating throughout that time).
    • A consumer proposal generally does not affect your secured assets, like your mortgage or car – although this depends on your personal situation.
    • A consumer proposal allows you to rebuild credit faster, particularly if you pay it off quickly.

    Bankruptcy or Consumer Proposal – Which One is Best for You?

    Whether you choose to file for bankruptcy or for a consumer proposal can depend on your circumstances.

    Questions to consider include:

    • How much total debt are you carrying?
    • How much unsecured debt are you carrying?
    • How much are your secured assets worth?
    • Can you demonstrate the ability to repay a portion of your debt?

    It can difficult to answer these questions on your own. The best way to go about deciding which insolvency option is for you – or if there is an alternative debt consolidation method that may work – is by contacting a debt counsellor, such as DebtCare Canada, for a free consultation.

    Having an Advocate on Your Side

    Both a consumer proposal and bankruptcy must be filed through a Licensed Insolvency Trustee (LIT, or formerly known as a Trustee in Bankruptcy). However, if you’re filing for insolvency, it’s also important that you have an advocate on your side.

    While Licensed Insolvency Trustees administer the consumer proposal or bankruptcy, they are not equipped to be this advocate for you. A) They represent both you and the creditor, so they are not entirely on your side. And B) they earn their money based on the size of your filing.

    It’s best to have a debt counsellor – like our experts at DebtCare Canada – on your side during an insolvency filing to ensure you are represented at the table during the filing process. We can make sure you are protected and getting the best deal possible.

    At DebtCare, we will help you decide whether filing for bankruptcy or for a consumer proposal is right for you and be your advocate throughout the entire process. We perform an independent review of your financial situation and make practical recommendations that will work for you.

    Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.

  • Rebuild Your Credit in 2020 Using These Simple Steps

    Happy 2020! We’re just over a month into the new year. How are your resolutions going? If you’re anything like the majority of Canadians, they might have fallen by the wayside…

    A 2018 survey from Strava found that most New Year’s resolutions only last until the second Friday in January… In 2020, that was January 10.

    If your goals have been put on the backburner, please don’t beat yourself up. Recognize that it’s completely normal and the issue likely says more about the process than it does about you.

    In this blog, we’re looking at simple techniques to stick to your 2020 resolutions – specifically rebuilding your credit.

    Why do most New Year’s Resolutions fail?

    Some people say that resolutions never last. But the problem is often in the intention vs. the action. Many people enter the new year with big goals and big plans – that prove to be difficult to stick to.

    They try to do too much at once or only set vague goals (like save more money) without thinking about what the daily actions will be.

    There’s a better way. Through simple, clear, consistent action you can make big progress on your goals in a way that isn’t overwhelming.

    You can also pick goals that give you more bang for your buck. For instance, resolving to fix your credit is a great goal because in turn it:

    • Helps you plan your budget.
    • Creates awareness around your financial habits.
    • Deals with debt.
    • And has far-reaching consequences – it’s a goal that will serve you well into the future and can extend into other good financial habits.

    If you aren’t achieving your financial goals, ask yourself – how can I make those goals more achievable and realistic for my schedule?

    How to Rebuild Your Credit in Three Simple Steps

    Want to fix your credit this year? Here’s how to do it.

    Step One: Get your credit report

    To begin, you need to know where your credit currently stands. Request a copy of your credit report from one of the Canadian credit agencies – Equifax or TransUnion.

    When you know your score, you will know your starting point.

    Learn more about the credit score range: https://debtcare.ca/credit-reports-101-the-credit-score-range-and-you/

    Step Two: Get rid of debt that is harming your credit

    While there are several steps you can take to fix your credit, remember that we are focusing on the most impactful actions. You want to take the steps that are going to garner the most improvement in the simplest ways.

    For rebuilding your credit, that is getting rid of debt.

    When you’re carrying problem debt, it’s incredibly hard to rebuild your credit score even when you practice other good habits, like paying your bills on time and in full. That problem debt will still be dragging your score down.

    So, step two is finding a way to get rid of that debt.

    You could consider:

    • Making a settlement with your creditors.
    • Paying the debt in full (if you have the funds or can get them).
    • Consolidating debt through a debt consolidation loan.
    • Filing for a consumer proposal.
    • Filing for bankruptcy.

    Your method may vary and the method you choose may affect your credit score longer (for instance, filing for bankruptcy leaves you with an R9 credit rating) but the point here is to clear your problem debt through the best option for you.

    Learn more about debt consolidation options: https://debtcare.ca/your-2018-debt-consolidation-options/

    Step Three: Deal with debt that has already gone into default

    Beyond current debt that you’re carrying (and hopefully dealt with in step two), you might also have old debts that were never paid – these are called default debts.

    And while they may be in the past, they can still be dragging your credit score down.

    Your credit report will reveal whether you have default debts. Some of the same methods used in step two can help deal with it — such as a settlement with the creditor or filing for a consumer proposal or bankruptcy (depending on the type of debt).

    It’s also a good idea to talk to a debt counsellor to find the best way to deal with any default debts. They can assess your situation and offer advice on what methods are best for your situation.

    Learn more about what happens when you default on debt: https://debtcare.ca/will-a-creditor-actually-sue-you-when-you-default-on-a-debt/

    Moving Forward

    Once your old debts are taken care of, new credit habits will be much more impactful. Focus on building good habits, such as always paying your bills on time and in full and not taking on more credit than you can afford.

    This mindset will help take your 2020 credit repair resolution and make it a life-long behaviour.

    What’s your financial resolution for 2020? Share with us on social media. DebtCare is on Twitter, Facebook, and LinkedIn.

    Contact us for help with rebuilding your credit or achieving your other financial goals. We’ve helped thousands of Canadians get out of debt, fix their credit score, and more.

    Call 1-888-890-0888 or visit www.debtcare.ca for a free consultation.

  • Bankruptcy and Consumer Proposals Rise as Consumer Debt Reaches Record Limits

    Are you struggling with consumer debt? If so, you’re not alone.

    According to BNN Bloomberg, the average Canadian household owes $1.76 for $1 of annual disposable income. The same household devotes $0.15 of every disposable dollar to making principal and interest payments on debt, which is a record high.

    BNN Bloomberg also noted that when you add together consumer credit, mortgage, and non-mortgage debt, Canadians are carrying $2.28 trillion in credit market debt.

    What’s more, beyond just carrying debt, they’re paying the price. The number of insolvencies – bankruptcies and consumer proposals – filed by consumers in 2019 increased from the year before.

    While the numbers for the final quarter of 2019 have not been released yet, as of Q3 2019, Canadian insolvency filings were up to 34,708 — up more than 4,000 over Q3 2018. Of that, the number of bankruptcies rose slightly (from 13,549 to 13,757) and the number of consumer proposal filings rose substantially, going from 16,764 to 20,951.

    Why are more Canadians going into debt?

    According to a survey from Manulife, two in five Canadians believe they will never be debt-free.

    There are many reasons Canadians might currently be struggling with debt. Housing prices are continuing to rise, especially in larger cities like Toronto and Vancouver.

    While interest rates have stayed the same for the past year, the added spikes in 2017 and 2018 still didn’t help for those carrying debt. Some have also speculated that it’s too easy for Canadians to gain access to credit – and spend more than they can afford to pay back.

    For others, job insecurity can be part of it – not enough income to make ends meet. They might be facing job loss, working in a precarious employment situation (like the gig economy) with inconsistent income, or simply not earning enough to afford high housing prices.

    Poor credit habits can hurt your finances, too. While paying only the minimum balance on your credit cards can seem like a good idea, it can actually mean more debt in the long-term.

    Sometimes the moments leading up to major debt troubles are insidious. What can start as a seemingly harmless action can snowball into a much bigger problem.

    What exactly does struggling with debt look like? It could include:

    • Being unable to pay all your bills in full and on time each month.
    • Making only the minimum payments each month.
    • Being unable to make even the minimum payments.
    • Having more debt than income.
    • Always taking out another loan to pay off your old debts, getting into an unsustainable cycle.
    • Relying on credit to pay all your bills because you don’t have enough funds in your bank account.
    • Consistently being unable to afford the items you need to achieve a daily quality of life – pay for groceries, afford your rent, and so on.
    • Living paycheque to paycheque without knowing how you would afford an emergency.
    • And more…

    This might vary depending on your exact circumstances, but any of these could be a precursor to bigger problems down the road.

    How to deal with debt before major damage is done

    The sooner you realize you have a debt issue, the more likely you are to resolve it before major damage is done to your quality of living.

    When you file for insolvency, your credit score takes a big hit. While this is sometimes the best option, and it is possible to recover over time, if you tackle your finances early you minimize the need for this type of action.

    Some steps you can take to resolve problem debt include:

    • Creating a realistic budget and looking for ways to reduce your current expenses, then putting the savings towards paying off your debt.
    • Honestly assessing where your money is currently going and eliminating wasteful spending.
    • Practicing good financial habits, like always paying your bills on time and in full.
    • Not relying on credit. While some use of credit is good for your credit score, you don’t want to be using it because you don’t have the money elsewhere.
    • If you have an income problem, looking for ways to earn more – either through asking for a raise, finding a new job, or getting a part-time job.
    • Seeking out debt consolidation methods, such as mortgage refinancing.

    While filing for insolvency is one option, it’s not the only option – especially if you tackle the problem early.

    In 2020, make your resolution to figure out your finances for good. Debt freedom is possible with a little planning. There’s no point feeling bad about the circumstances that got you into debt. Instead, realize you’re not alone and focus on finding the way out.

    That’s where we come in. At DebtCare Canada, we will assess your situation and make recommendations to deal with debt. We’ll go over your options and create a realistic plan for success.

    Contact us today for a free consultation. Call 1-888-890-0888  or visit www.debtcare.ca.

  • 2020 Plan to Fix Your Credit and Finances

    The new year is around the corner. It’s the perfect time to make a plan to fix your credit, finances, and get out of debt for good!

    2020 isn’t only a new year — it’s also a new decade. Start the next 10 years off on the right financial footing with these tips.

    Here’s how to fix your credit and finances:

    1. Start by assessing your current state

    To set the right financial goals, you need to know where you’re currently standing.

    Find out:

    • How much income you earn each month.
    • How much total debt you carry — including interest rates.
    • How much you spend each month.
    • How much you save each month.
    • What your credit score

    From there, you can identify where there is room for improvement.

    Some of this data could be obvious. You might already know that you are carrying too much credit card debt, or you were denied a loan because your credit score is too low. But finding out your exact starting position will help you measure your results.

    1. Set SMART goals for the year ahead

    Once you know your current standing, you can now identify where you want to improve and change. But the way you set those goals can be equally important!

    It’s easy to set a goal like “Get out of debt by 2021,” or “Fix my credit score,” but these types of statements are often too vague.

    Instead, set SMART goals. SMART goals mean:

    S – specific

    M – measurable

    A – achievable

    R – realistic

    T – timely

    A SMART goal for fixing your credit might be: “Bring my credit score from 500 to 600 by 2021 by paying every bill in full and on time each month and starting credit counselling.”

    A SMART goal for getting out of debt might be: “I will pay off all my non-mortgage debt down to $0 by June 2020 by exploring debt consolidation options and finding savings in my budget each month.”

    1. Choose your strategies

    Your goals are only as strong as the strategies you use to achieve them. The right strategy can depend on your specific situation.

    For instance, if you want to fix your credit score, it will be much harder to achieve if you are carrying a lot of debt. Instead, you might look into getting out of debt first.

    To do that, you would consider debt consolidation strategies, such as:

    • Finding room in your budget and monthly income to pay off your debt.
    • Credit counselling.
    • A debt consolidation loan.
    • Refinancing your mortgage.
    • Filing for a consumer proposal.
    • Filing for bankruptcy.

    Each option has its pros and cons and the right one (or the right mix of options) will depend on your lifestyle!

    1. Seek support

    You don’t have to go after your financial goals alone. Accountability can be one of the most effective ways to set yourself up for long-term success.

    A debt counsellor is a great ally to have at your side. They will help build your strategy to reach your 2020 financial goals and beyond.

    They’ll identify where you should start, what steps you should take, when you should take them, the best mix of options for you, and more.

    Achieve all of your new year financial resolutions with DebtCare Canada. We’ve helped thousands of Canadians fix their credit and finances and we can help you, too!

    Contact us today for a free consultation to start your 2020 planning. Call 1-888-890-0888 or visit www.debtcare.ca.

  • 2 Ways to be Out of Debt Within 5 Years

    When you’re in financial trouble, you want to get out of debt quickly. But finding out how to pay off debt fast can depend on many factors:

    • The amount of debt. If you are carrying a lot of debt, the time to pay it off in full may be longer.
    • How much debt and interest you accumulate along the way. The problem with paying off high-interest debt is that the interest continues to add up. If the debt is high enough, you may only be able to afford the interest payments each month, leaving you still in debt.
    • Your income level. Unless your income level drastically changes, it might be hard to find room in your current budget to truly get out of debt fast without your quality of life suffering.

    Some credit cards can take up to 96 months to pay off in full — the equivalent of eight years! That’s eight years of scrimping and saving and constantly having to think about debt payments. There is a better way.

    In order to get out of debt fast you need a solution that:

    • Is realistic and sustainable. You want this to last for the long-term.
    • Is easy to access. If your credit score is hurt, options may be limited.
    • Avoids high-interest payments or fluctuating interest payments.

    Luckily, there are two solutions that meet all of these requirements and more! Pay off debt quickly — within five years (or sooner!) — with one of these methods:

    1. Second mortgage amortized over five years.

    If you own your home, you may be eligible for a second mortgage. You can amortize this mortgage over five years and then use the equity to pay off your debt in one lump sum. Then, over the next five years, you can pay the second mortgage back in fixed, scheduled payments.

    You will always know what you are paying and when you are paying it. This will allow you to budget wisely and with flexibility.

    1. Filing for a consumer proposal.

    If you don’t own a home, or a second mortgage isn’t an option, filing for a consumer proposal may be the way to go. In a consumer proposal, you make an offer to your creditors to pay your debts for less than you owe. The creditors must feel confident that they are getting more back than they would if you filed for bankruptcy instead.

    Once you are in a consumer proposal, you have five years to pay it off. You can do so sooner if you have the money available. This will allow you to clear your high-interest debts quickly and pay back one monthly payment over a planned, fixed schedule.

    Within five years, you can be debt free and with a lot less stress along the way!

    Interested in exploring your options? DebtCare Canada can help. We provide access to second mortgages, first mortgages, home equity lines of credit, and more to people with all types of financial situations.

    Or, if you’re thinking about filing for a consumer proposal, our financial advisors will make sure you are protected and getting the best deal possible.

    Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.

  • Protecting Your Home Through Financial Restructuring

    Having financial troubles can be stressful no matter where you are in life – but it’s doubly so if you own a house.

    There’s a common fear that financial restructuring will mean losing your home. Fortunately, there are ways to protect against this.

    The first thing to do is to make sure that you stay up-to-date with your mortgage payments. If you haven’t defaulted on your mortgage, your chances of keeping your home through a financial crisis increase greatly.

    Let’s look at some of the financial restructuring options you might have when you own your home…

    1. Debt Consolidation

    As long as your mortgage payments are up to date, a debt consolidation loan can be a good way to deal with outstanding unsecured debt.

    Unsecured debt might be credit card bills, lines of credit, your cell phone bill, etc. It is anything not tied to collateral – so your mortgage and car loan would not fall under this umbrella.

    Unsecured debt usually has a high interest rate, making your monthly payments even more expensive. This is where a consolidation loan can help. You can use the money to pay off your unsecured debts, and then pay back the consolidation loan at a fixed interest rate over a manageable schedule.

    You won’t be paying as much in interest, so you can use the extra money to keep your mortgage payments up to date.

    1. Home Equity

    Sometimes your home can actually be a source of income for financial restructuring. If you have equity available, you might be able to use it to pay off your outstanding debts – essentially, this is a form of a consolidation loan.

    Again, this is dependent on your mortgage payments being current and made on time every month.

    1. Filing for a Consumer Proposal

    If you don’t have enough equity available or aren’t eligible for a consolidation loan, filing for a consumer proposal is another option.

    Consumer proposals deal with unsecured debt up to $250,000 (excluding your mortgage). In a consumer proposal, you make an offer to your creditors to settle your debts for less than what you owe. This offer must be accepted by the majority of your creditors and you must be able to prove they’ll get more money than they otherwise would if you filed for bankruptcy.

    In most cases, you can keep your home when you file for a consumer proposal, as your assets remain untouched. Again, this depends on your mortgage payments being kept up to date and is based on you having enough income to continue paying your mortgage after the proposal.

    A good financial advisor will structure your consumer proposal based on equity.

    If you have more than $250,000 in unsecured debt, you might file for another kind of proposal or bankruptcy instead.

    1. Filing for Bankruptcy

    Filing for bankruptcy is where most people fear they will lose their home. This is because in a bankruptcy, assets are often sold to pay off debts – including in some cases your house.

    However, this doesn’t always happen – and you may able to keep your home depending on the amount of equity you have available.

    If:

    • You don’t have much equity (this varies depending on province), and
    • Your mortgage payments are up to date

    your ability to keep your home increases substantially.

    If you do have a lot of equity, you may still be able to keep your home by repaying your equity through borrowing money, or through a second mortgage.

    A good financial advisor, like those at DebtCare Canada, will also help you structure your bankruptcy based on equity.

    1. If You Can’t Afford Your Mortgage…

    As we’ve discussed, keeping your home through financial restructuring largely depends on being able to continue making your mortgage payments.

    If your mortgage is up-to-date, you’re less likely to lose your house. But what if even after consolidating debt and making a budget you don’t have enough income to make your mortgage payments?

    This can be a whole other issue – but it’s important to remember that you still have options. You might need to:

    • Make more income through asking for a raise or getting a second job.
    • Or sell your home and downsize to a smaller mortgage.

    While selling your home may not necessarily be the same thing as keeping it, it can be preferable to losing your home through having it seized. In this option, you would still retain the profits from the sale, and you could use the money to move into another, less expensive property.

    A good financial advisor, like the ones at DebtCare Canada, can help you sort through your financial restructuring options, so your home is protected.

    Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.