debtcare.ca

Category: Personal Debt

  • Rising Consumer Debt in Canada and the Need for Timely Personal Finance Management

    Rising Consumer Debt in Canada and the Need for Timely Personal Finance Management

    Consumer debt has been increasing over time in Canada.

    Even in 2020, due to a very resilient housing market and applications for new auto loans, total consumer debt went up by 3.8% to $2.041 trillion in the third quarter of the year!

    Equifax Canada shared in-depth insights, drawn from banks and other lenders, in its recent report.

    Some of the key findings included:

    • In Q3 2020, mortgage balances increased by 6.6% compared to the same time in 2019.
    • For the first time, the average new mortgage loan amount surpassed $300,000.
    • In Q3 2020, new auto loans were also up 11.7% compared to the same period in 2019.
    • Average credit card spending was almost back to the pre-COVID levels during this time period.
    • About 12% of new credit products in Q3 2020 were opened by consumers who had some form of deferral on their credit file.

    High levels of consumer debt are not sustainable in the long run because they lead to vulnerabilities not only for individuals but also for the economy as a whole.

    For instance, if you lose your job or are faced with an unexpected expenditure, it will become hard for you to manage your finances as you already have significant debts to pay off. Similarly, for the economy, as a whole, larger debts can create further problems during economic crises.

    This is why it is important to keep a track of your debt-to-income ratios.

    So, once you ascertain that you may need to work on your personal finance management, there are some strategies you can put into place.

    Four of these key strategies for reducing your debt and ultimately become debt-free are shared below:

    I.  Have a comprehensive budget in place. This enables you to monitor your monetary inflows and outflows. You are able to gauge how much total income you are receiving from different sources and how many expenses you have.

    II.  Start small. When it comes to debt reduction, a good way to continue reducing your debt is by taking small steps. This can be by opting for a more cost-effective cell phone plan, preparing home-cooked meals to avoid excessive outdoor dining, and cancelling subscriptions you don’t need.

    III.  Monitor your debts. This can help you identify high interest debts, such as credit cards, and ensure that you’re paying them off sooner or at least making the minimum required payments. If you have multiple types of debts and believe that repayment could be an issue in the future, you can look into consolidating your debts into a single payment.

    IV.  Save. It is important to save. You could either choose to invest in programs such as retirement saving plans or set aside a certain percentage of your salary for savings before you start spending and paying your bills.

    At DebtCare, we are committed to supporting you in financial planning and elimination of debt. We do this by working with you to identify where you should start, what steps you should take when you should take them, the best mix of options for you, and more.

    To date, we’ve helped thousands of Canadians fix their credit, lower their debt, and improve personal financial management. We can help you, too!

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

  • What’s the ‘Right’ Debt-to-Income Ratio?

    When it comes to managing your personal finances, it is essential to keep a track of your debt-to-income ratio.

    This helps you keep an eye on your debt levels and take corrective measures if your debt seems to be going on an upward trajectory.

    This is particularly true during a global pandemic!

    So, what is the debt-to-income ratio?

    This ratio measures the amount of debt held by a person or household against the amount of disposable income they have.

    It can be calculated monthly or yearly. You just need to add up all your monthly debt payments and then divide them by your gross monthly income to arrive at the monthly ratio.

    Some of the common sources of income and debt are mentioned below:

    • Income

    a)  Total household income;
    b)  Child care benefits;
    c)  And retirement benefits.

    • Debt

    a)   Mortgage;
    b)  Other personal loans;
    c)  Vehicle loans;
    d)  Credit cards;
    e)  And monthly bills.

    A low debt-to-income ratio indicates that you have lesser debt and that’s almost always a good thing.

    Though, how bad is a high debt-to-income ratio?

    Well, an important thing to note is that higher levels of debt can make you financially vulnerable. For instance, if you lose your job or are faced with an unexpected expenditure, it will become hard for you to manage your finances as you already have significant debts to pay off.

    Similarly, high debt-to-income ratios are worrying for policymakers too. In June 2020, Statistics Canada reported that the household credit market debt as a proportion of household disposable income rose to 176.9%.

    High ratios are concerning because high levels of debt can reduce the economy’s ability to withstand economic shocks in the long-run.

    Coming back to personal debt, what is the best debt-to-income ratio?

    While there is no specific number and everyone’s situation is different, it is advisable to keep your debt-to-income ratio below 40%. If the number you calculate is higher than this, it is prudent to get rid of high-interest debt such as credit cards and work towards reducing other types of debt.

    Also, it matters what type of debt you have accumulated over time.

    If your debt is primarily due to a mortgage, on a property that has high equity, that is better than having a debt that’s not backed by an asset.

    If you are unsure of how to manage your debt or are contemplating how to consolidate your debt, a personal debt management plan could be helpful. Working with a debt consultant can enable you to create a tailored plan that helps you gain better control of your finances and maintain a healthy debt-to-income ratio.

    We offer a free consultation to explore what options are available to you.

    To learn more about our services call or text us on 1-888-890-0888 or visit www.debtcare.ca.

  • Credit Advice for the New Year: How to Get Out of Debt in 2021?

    Happy New Year!

    A new year is a new start. If you’ve faced some financial challenges last year, now is a good time to take some steps to rebuild your credit score and manage your debt.

    A series of small changes are all you need to bring your credit back on track! Here are some suggested actions you can take:

    1. Get an updated credit report to get a better understanding of your current financial standing.
    2. Create a budget for your expenses and ensure that you’re keeping a close track of your expenditures. This will help you trim down unnecessary spending and identify opportunities for savings.
    3. Always make more than the minimum monthly payments on your credit cards.
    4. In case you have multiple credit cards, try to keep your cards at only 50% of their credit limits or try to pay off and cancel some of these cards.
    5. Settle collection debts and send credit reporting agencies proof of any major developments like paying off a major account or a settlement to ensure that your report is up-to-date.
    6. Lastly, try to avoid taking on additional debt.

    The key to improving your credit score is keeping a close eye on your overall debt and ensuring that you’re paying down each creditor one by one.

    However, if your debt is unmanageable and you’re not able to make these payments, you don’t have to be stressed out. There are other alternatives that you can consider. For instance:

    • If you have equity in your home, you can leverage it to deal with your debt. As interest rates are quite low at the moment, it is worth considering refinancing options.
    • You can also look into a second mortgage. These mortgages are provided on the basis of equity and not your credit and income. So, if your credit is bruised or you are self-employed, this may be a good option for you.
    • Even if there isn’t enough equity to refinance, you can always rely on government-approved debt settlement programs, such as a consumer proposal. 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.

    No matter what your financial situation is, you can count on us for credit advice and debt consolidation solutions. Contact us today for a free consultation and start your journey to becoming debt-free! Call or text 1-888-890-0888 or visit www.debtcare.ca.

  • Debt Management Plan – Restructure Finances as You Prepare to Change Careers

    If you’re thinking of switching careers … you’re not alone.

    A survey commissioned by Amazon, and published on the CNN website, shares that 61% of job seekers surveyed are looking for a job in a new industry because of the pandemic.

    COVID-19 has given us an introspection opportunity. It has given us time to review our career choices and examine if there is something better out there.

    While some people are questioning if they were even on the right career path, to begin with, others are looking into continuing their education.

    What has changed?

    The way we work has changed too. For instance, work from home policies were previously being implemented by only a handful of companies. Now, companies are beginning to see that work from home can indeed be implemented even in a Post-COVID-19 world.

    HR professionals are championing it because it has improved work-life balance, many employees are happy that they don’t have to commute long distances, and companies are realizing that they may not need huge office spaces after all!

    Similarly, when it comes to industries, some are doing better than others. For instance, healthcare, essential retail, and information technology firms continue to hire despite a global pandemic.

    Though, many jobs in retail, hospitality, travel, manufacturing, and tourism have disappeared.

    Why is it important to restructure your finances?

    If you’re considering a career transition or perhaps even going back to school, it is important to have a financial plan in place.

    Following your dreams and taking a leap of faith can be difficult if you have debt and financial concerns bothering you.

    This is particularly true if you’ve lost your job and already have debt to pay off. If your bills keep accumulating and you’re not able to pay them off, this can impact your credit score.

    So, when opting to start a new career, reviewing and restructuring your finances and debt can help you gain peace of mind. Your debt management plan should include:

    • A detailed budget.
    • A plan to avoid taking on more unnecessary debt, such as charging expenses to your credit card.
    • Consolidating debt payments and paying off high-interest debt.

    You can also use our online debt repayment calculator, to easily calculate how you can be out of debt within five years!

    How can we help?

    Getting your finances in order can be challenging particularly when you have to focus on a career transition.

    This is where credit advice from a financial consultant can help.

    Working with a financial consultant, like DebtCare, can help you come up with a plan to reduce debt; enabling you to have a fresh financial start to match your new career trajectory.

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

  • Canadian Tax Consultants: Do You Have a Debt Relief Partner to Support Your Tax Clients Who are in Trouble?

    It is not uncommon to find out that your client is facing financial troubles – particularly during the time of a global pandemic.

    In fact, many independent professionals and tax specialists including personal tax accountants, tax preparers, bookkeepers, financial advisors, lawyers, and estate planners are amongst the first to learn that their client is facing financial turmoil.

    It can be a challenging situation when you are preparing a client’s books and your client reveals that they have a huge debt and no means to pay it off.

    Or, when your client is being audited and you know that the outcome will not be favourable.

    Where the CRA collections team is involved, the situation can get trickier. The CRA is relentless and when your client tries to manage their problem on their own – it can make matters worse.

    For instance, the CRA will look for financial disclosure that may lead your client to disclose where they work as well as their bank and asset details. Perhaps the CRA accepts a temporary arrangement – but the moment it is up, they can move forward with wage garnishments, freezing of bank accounts, and liens on the property.

    Today, an average Canadian owes $1.58 per dollar of disposable income.

    This debt is likely to increase when mortgage deferrals end, the government’s relief measures are withdrawn, and the CRA’s collection action resumes.

    This is the calm before a massive storm – would you agree?

    This is why it is great to have a partner in your corner who can independently represent your client and work with them to resolve their financial challenges.

    By providing your clients access to debt consolidation programs and opportunities for debt reduction, you are not only helping them navigate their financial challenges but are also strengthening your long-term relationships.

    This same level of service may not be received if you send your client to a trustee, this is because they offer insolvency as their service and your client will be counselled on that basis.

    Similarly, if you send your client to a bad credit lender who only offers high-interest products or a mortgage broker who only arranges mortgages, your client will only receive advice in those specific areas.

    At DebtCare, we provide access to many financial options and debt consolidation programs. We take on a consultatory role where the client pays for our consultation and after working with their financial profile, we guide them down the best path.

    This includes aligning all professionals that will be needed. Whether it is securing financing from a lender or working with a trustee to facilitate a consumer proposal, we can help.

    To learn more about our services for Canadian tax consultants, call or text us on 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/.

  • Holiday Financial Planning… Steps to Start 2020 on a Strong Financial Footing

    The holiday season is an expensive time for many! Between gifts, decorations, parties, and travel, the costs (and credit card charges) can quickly add up. To keep your budget and debt in check, holiday financial planning is a must.

    According to PwC Canada, the average Canadian consumer will spend $1,593 during the 2019 season — up 1.9% from 2018. That number increases with the type of shopping consumers choose to do. The average online-only shopper plans to spend $1,053 while the average multi-channel shopper (in-store and online) plans to spend $1,726.

    And that is just on shopping costs alone. This doesn’t factor in travel expenses, décor, food, and beyond.

    Overall, PwC reports, 17% of Canadian consumers are worried about credit card debt. Millennials and Gen Z are even more concerned: 22% and 24% respectively think too much debt might build up.

    Going into the new year with debt — especially high-interest credit card debt — is stressful. You need a plan to pay off your holiday purchases and leave 2019 on better financial footing than you started the year with!

    Holiday financial planning is the key to both preventing overspending during the holidays and making 2020 your most successful financial year yet. Here’s how to go about it.

    Assess Your Budget

    A budget is important for planning your holiday spending. Knowing how much you can afford to spend will help determine what you spend it on!

    • If you have a regular monthly budget, review how much you can realistically set aside for your holiday expenses.
    • If you don’t have a regular monthly budget, review your past month of spending. How much income have you brought in and what savings are left over?
    • Are there any areas in your budget or spending habits you could trim back on for your holiday spending?
    • Decide on the figure you are comfortable spending this season and that you are able to comfortably repay into 2020.

    Plan Your Holiday Spend

    • Make a list of everyone you are shopping for, food-related items, decorations, travel plans, and other expenses you will encounter this season.
    • Estimate how much you plan to spend per list item. Even just the act of doing this can be illuminating!
    • At this point you may see that you have planned for more than is in your budget estimate.

    If you’ve found that you plan to spend more than you can afford, you can try to either reduce what you plan to spend (looking for ways to save money) or you can go back to your budget and look for more wiggle room. To that end…

    Clean Up Your Debt

    One of the biggest hijackers of your budget is debt payments. If you owe money, you know just how much the interest payments alone can take out of your monthly budget. And even if it’s only a little bit, why not use that money for something else?

    Consolidating your debt can free up room in your budget for holiday spending and start you on the right financial footing for the new year. If “get out of debt” is your New Year’s resolution, you’ll already be a step ahead.

    Don’t Finance Your Holiday Spending 

    If you’ve found that you plan to spend more than you have, you might be tempted to make up the difference with financing — credit cards, lines of interest, a payday loan, and so on.

    Don’t do this! If you don’t have the income available now or won’t be able to pay off the expenses in full in the next month, it can create a stressful financial future. While you might profit in the short-term, you’ll have to make up the difference in the long-term. This can lead to lingering debt and credit score issues that you’ll still be trying to fix next holiday season.

    Instead, look for ways to make the holidays great on a budget. Your financial future will thank you!

    DebtCare Canada helps our clients with holiday financial planning, debt consolidation, budget planning, money saving, and more.

    Contact us for a free consultation to set yourself for success during the holidays and beyond. Call 1-888-890-0888 or visit www.debtcare.ca.

  • A Stress-Free Holiday May Start with Consolidating Your Debt

    The holidays can be a time of family, love, and joy, but they are also often a source of major stress — financial stress to be exact.

    Have you considered consolidating your debt to manage that stress?

    More than half of Canadians say that they go over their budget during the holiday season. A CIBC poll found that the average Canadian spends $643 on holiday gifts and $300 on décor and entertaining. And those figures only keep going up.

    Moneris found that after the 2017 holiday season, Canadians spent an average of 4.26% more during the last three months of 2017 than they did during the same period in 2016.

    A 2017 Angus Reid poll of 1,512 Canadians found that three-quarters of respondents wish they could save more money during the holidays and about 52% end up spending more than they liked.

    In order to avoid any long-term damage to your credit score, it’s important that you pay your bills on time each month and (preferably) in full. Making the minimum payment every month is not enough to ensure good credit.

    Plus, most credit cards come with high interest rates, so that $1,000 of debt can quickly add up to even more. If it took you five months (the average timeframe) to pay $1,000 at an interest rate of 18% you would have to make a payment of $209.09 per month and by the end of the five months would have paid $1,045.45, including interest.

    That might be okay if it is your only debt and you are not accumulating any more, but for most people that is not the case.

    While a certain amount of spending is likely expected during the holiday season, it can be particularly stressful if you are already carrying debt.

    For instance, say that you have:

    • $10,000 of debt on one credit card at 19% interest.
    • $5,000 of debt on another at 21% interest.
    • And now $1,000 on a new credit card at 18% interest.

    And you are hoping to pay it off by the next holiday season — in 12 months.

    You would then have to make monthly payments of $1,477.03. By the end of the year, you would have spent an additional $1,724 in interest. And that’s assuming you don’t accumulate any more debt or miss any payments. This also assumes you have the ability and tools to calculate the combined monthly payments of all these debts, which most people struggle with.

    It can be stressful trying to pay off holiday debt, but it helps to have a plan. That’s where consolidating your debt can come in.

    With debt consolidation, you can put all of your outstanding debts together in one monthly payment. If you choose a consolidation loan with a fixed interest rate you will only have one bill to pay each month and you will always know the amount you have to pay, so you can budget for your payments.

    This can allow you to enjoy your holidays without worrying about how you will pay for them.

    At DebtCare Canada, we can review your options and help arrange the debt consolidation that’s right for you. You’ll be able to enter the holiday season feeling relaxed and stress-free.

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

  • Creating a Plan to Repair your Credit in 2016

    debt12015 is coming to a close, and the past year has likely been full of change – such is life. For many Canadians, this means more debt accumulation, followed by a concern regarding bruised credit. So, why not get started on your New Year’s resolution early and get a plan in place to repair your credit for 2016?

    The first step is to request your credit report from Equifax AND Transunion – sometimes they report different information. This will give you a clear picture of where you stand credit-wise – as well as highlighting any issues with your credit, and should give you a good idea regarding how to start repairing it.

    Generally people have credit problems which fall into a few different groups. Your plan to repair your credit will be based on what the problem is, but typically the problem is bad credit history – defaulted debts and late payments.

    How you deal with this will depend on 3 factors:

    • Whether you owe the money or not – if you don’t owe the money, see below regarding inaccurate items.
    • Whether you have the ability to pay the debt – if you don’t have the ability to pay, see below regarding too much debt and maxed out credit cards.
    • If you owe the money and can pay in full or settle in full, you are about to start a long and arduous process that will involve documenting what the creditor will accept to settle the account, paying it, collecting acknowledgement from the creditor that it has been paid and ensuring that your credit report is updated.

    Something to keep in mind: R9s and collection items come off the credit report 7 years from last activity or when they were settled or paid – that said, you can begin rebuilding right away.

    Old items and inaccurate items on the report:

    In this instance you will need to file a dispute with the appropriate consumer reporting agency and be able to prove the error. This may include providing copies of letters or documented exchanges with your creditor, proof of payments, settlements, etc… This is a formal process – being represented is a good idea. If the agency doesn’t follow the law, a complaint to the government may need to follow.

    Too much debt and maxed out credit cards:

    In this instance you have to deal with the debt before you can fix the credit.

    If there is a lot of debt and no reasonable way you can pay it off, even over a long period of time – making minimum payments, no assets or assets like a home with limited equity – a consumer proposal may be the answer.

    Benefits of a consumer proposal:

    • Stops interest and debt from growing
    • Stops collection action
    • Allows for one monthly payment
    • Can be paid in full at any time – and because payments are generally much lower than the total of all minimum payments to your creditors, you can double and triple up on payments, use income tax refunds and other credits and get the total owed down!
    • Comes off the credit report 3 years from the date it is paid in full

    Once the proposal is filed, it should be independently reported to the credit reporting agencies immediately – the same should also occur once it has been paid.

    Creating your 2016 plan to rebuild and repair your credit should not be stressful – you just have to sit down, be realistic about your credit and finances and make it happen!

    Want to get started? Call DebtCare Canada today – we can help you through the entire process: 1-888-890-0888.

     

  • Does a Consumer Proposal in Canada Stay on Your Credit for 7 Years?

    debt care1Many people choose a consumer proposal in Canada to get finances back on track. These represent a great debt relief option because you can settle your debt, often reduce the total balance to be repaid, freeze interest and consolidate the various monthly bills into one single, monthly payment.

    Of course, as with any debt relief solution, there are implications for your credit, and we are often asked what those implications are. Many individuals come to us with a fear that a consumer proposal will ruin their credit for the long term, and leave happy knowing that this isn’t actually the case. Often the pros far outweigh the cons, especially when you consider the fact that your credit is likely already not so stellar – coupled with the fact that a CP can save you thousands of dollars and stop self-serving creditors from continually harassing you.

    When it comes to consumer proposals, by far the question asked most often is “how long does it stay on my credit report?” The answer is fairly simple, but the length of time really depends of you. Many think that a CP is just like a bankruptcy – on your credit report for 6 years following the date of discharge – but this is not the case.

    In a nutshell, a proposal is on your credit for 3 years from the date it is paid off in full. The faster you pay off the proposal, the faster it is off your credit report.

    Here is a handy chart to help show you how to calculate how long a CP will be on your credit:

    Paid of immediately On your credit report for 3 years overall
    Paid off one year after filing On your credit report for 4 years overall
    Paid off two years after filing On your credit report for 5 years overall
    Paid off three years after filing On your credit report for 6 years overall
    Paid off four years after filing On your credit report for 7 years overall
    Paid off five years after filing On your credit report for 8 years overall

    A consumer proposal in Canada is not like bankruptcy where you have an ongoing obligation to your trustee pending a discharge. Once creditors agree to a proposal, it is binding and can be paid off at any time. Or, you can choose larger monthly payments to get it paid off faster – the choice is up to you and your own personal situation.

    Once you have negotiated a proposal and it has been accepted, start rebuilding your credit quickly with a secured credit card. This will help you establish good credit behaviour and show future lenders that you are committed to getting back on track.

    Also, make sure that you stay on top of your credit report. Ensure that the credit reporting agencies are aware that you have filed, and also that it has later been paid off – don’t just assume that they have been made aware. Consider sending letters of discharge through registered mail.

    Rather than being a credit rating killer, a consumer proposal is actually a great way to begin the process of getting your credit rating back on track. By consolidating all payments and reducing principal, you can get back on your feet, and don’t have to worry about long term impacts.

    For more about filing a consumer proposal in Canada, or to discuss other options for debt relief, call DebtCare Canada today at 1-888-890-0888.