debtcare.ca

Tag: debt consolidation

  • Debt Consolidation Options in Ontario – We List the Different Types of Debt Consolidations

    In Ontario, when consumers or businesses finds themselves in financial trouble there are a number of financial options available to help deal with their debt. In this article, we list the different types of debt consolidation to help you understand which options are available to you if you are having problems managing your debt.

    Debt consolidation option number one – use your home to consolidate debt. If you have some equity in your home, it is a very effective choice for consolidating debt. Refinancing your first mortgage, taking out a second mortgage or a home equity line of credit will enable you to obtain low  interest financing to consolidate your debt. Mortgages enable you to amortize your monthly payments so you will often have more flexibility when negotiating the amount of those payments.

    Debt consolidation option number two – an unsecured loan or line of credit. Where this option is concerned, do lots of research. There are finance companies that offer unsecured consolidation loans at sky-high interest rates. Interest rates that are higher than what you may be paying on your credit cards. They may try to sell you on the benefit of a single monthly payment, which may be lower than what you are paying now – but this could cost you big time in the long run. If you cannot pay your minimum monthly payments any longer and your bank does not approve you for a prime rate loan or line of credit to consolidate your debt, take time to think about your choices before jumping into a high interest consolidation loan with a finance company.

    Debt consolidation option number three – credit counselling. Credit counselling agencies are not for profit organizations who obtain funding from the big banks. They will offer you a single monthly payment and pay your debts on your behalf. While you may think that you have received a debt consolidation loan because you are making a single monthly payment, this is not a consolidation loan. Your creditors will receive significantly less than what you owe and these credit counselling programs will cause major damage to your credit report. The repayment could be over 5-6 years and the credit counselling program will be reported on your credit report for 3 years from the date it is paid in full.

    Debt consolidation option number four – consumer proposals. Like credit counselling this is not a consolidation loan but many trustees in bankruptcy promote them as though they are because they involve a single monthly payment lower than what you have been paying on a monthly basis. They are a better choice than a credit counselling program because, if negotiated properly, they can significantly reduce the overall amount of debt that you owe. Like credit counselling, a consumer proposal will stay on your credit report for 3 years from the date it is paid in full, however, they do often offer shorter repayment terms. They also offer you protection from your creditors and will stop a wage garnishment or other enforcement option because they are federally mandated whereas credit counselling is not.

    How do you know which debt consolidation option is the right one for you? For starters, consider a debt consolidation the same way you would a big ticket purchase. This truly is an example of buyer beware, because when you go to a bank, finance company, credit counselling agency or Bankruptcy Trustee, their objective will be to sell you their products and services. When working with a financial consultant or debt counsellor you can determine the right option and obtain professional guidance to secure the best outcome.

    For more information about debt consolidation options in Ontario or to obtain advice with respect to your personal financial situation contact Michael Goldenberg at DebtCare Canada by calling 416 907 2582 or visit www.debtcare.ca

  • Why do Debt Counsellors Charge a Fee for Debt Help in Ontario?

    Debt counsellors are not “not for profit” credit counselling agencies and are actually a form of financial consultant. This often gets misconstrued because credit counselling agencies promote debt help in Ontario; what is not known is the fact that they are largely funded by the major banks and are often not the right choice if you are struggling with a financial problem.

    Debt counsellors represent individuals and businesses that have problems managing their debt. They do charge a nominal fee for their services because they are not funded by anyone else. They represent you exclusively in whatever choice you make, as it relates to strategizing a way out of debt.

    When you visit a debt counsellor to get debt help in Ontario, she will review all of your financial information. This includes your income, assets, liabilities and budget. She will provide you with many scenarios for you to choose from, all designed to help you deal with your debt. These scenarios could include a new budget, a debt consolidation, a debt settlement, consumer proposal or, where necessary, a bankruptcy.

    Due to the fact that they do not administer bankruptcies and consumer proposals  the way Bankruptcy Trustees do, they will not recommend bankruptcy or a consumer proposal as an option unless it is absolutely necessary. Bankruptcy Trustees only make money if you file a bankruptcy or consumer proposal. In the case of a bankruptcy, they are paid a tariff out of the proceeds of the bankruptcy. In the case of a consumer proposal, they are paid a percentage of the consumer proposal. If you qualify for a consumer proposal or bankruptcy, they will arrange it for you; however, that doesn’t necessarily mean it is the best choice for you. It means that it is the only choice they can offer you based on the tools they have available to them.

    Debt counsellors charge a fee for debt help in Ontario because they will do a considerable amount of work while representing you and ensuring that you make the right choice for your situation. Bankruptcy Trustees do not represent you; they are officers appointed by the Superintendent of Bankruptcy to administer bankruptcies and consumer proposals. Their mandate is to administer a bankruptcy, ensuring that the creditor receives as much money as possible. While they may appear to represent you, because you sign your final paperwork with them and grant them legal status, they in fact are acting in the best interest of your creditors.

    This brings us to the next reason that debt counsellors charge a fee for debt help in Ontario. If it happens that a consumer proposal is the best choice for you, there are two major reasons that you benefit from being represented by a debt counsellor:

    1.       In the case of a consumer proposal, the Bankruptcy Trustee gets paid based on a percentage of the consumer proposal that they arrange for you. The more they can negotiate for you to repay your creditors, the more money they will earn. This means that you may not always end up with the best deal. A debt counsellor will help to negotiate lower consumer proposals in many cases. Lower than what you would have been offered had you gone to a Bankruptcy Trustee directly, which could save you thousands!

    2.       A Bankruptcy Trustee will almost always try to get you to file a consumer proposal, even if you also qualify for bankruptcy. In a bankruptcy, your creditors receive much less money and so does the Trustee. If they present you with a consumer proposal as an option, as opposed to a bankruptcy, they make more money. The problem is that if in fact you are insolvent, you will inevitably end up having problems making the payments required by the consumer proposal. The payments will last for a much longer length of time when compared to a bankruptcy.

    At the end of the day, if your debt has become unmanageable, it makes complete sense to obtain a financial opinion and even representation from an unbiased party. One who understands the world of finance in depth, thereby ensuring that you make responsible financial choices that protect your wallet.

    If you would like more information about why debt counsellors charge a fee for debt help in Ontario or if you are struggling financially, please contact Michael Goldenberg at DebtCare Canada by calling 416-907-2582 or visit www.debtcare.ca