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Tag: get out of debt

  • 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.

  • Where To Get Online Debt Help — Payday Lenders Are NOT The Answer!

    During the COVID-19 pandemic, many Canadians have lost their jobs or are receiving reduced income.

    But while incomes have declined, debt payments haven’t necessarily done the same.

    Some lenders offered loan deferrals, but it’s important to note that deferrals aren’t forgiveness. What this means is that you will have to pay those debts eventually — and it may come with extra costs, such as interest for the deferral period.

    And not all lenders have even offered these deferrals. Some may expect you to keep making your payments throughout the COVID-19 pandemic, plus your other bills, like housing and utilities.

    If you’re in this boat, you might need help to get out of debt.

    The Problem with Payday Loans

    Payday loans should be avoided completely if you want to get out of debt.

    The simple truth is that payday loans rarely (if ever) actually improve your finances. This is because:

    • They’re short-term. They need to be repaid within 14 to 62 days.
    • They come with sky-high interest rates. Payday lenders often charge an annual interest rate of between 391% and 652%!

    The worst part is that payday loans trap you into a vicious cycle that creates more debt.

    Take this scenario:

    • You take out an advance on your paycheque for $750, plus fees and interest.
    • That money must be paid back within three weeks, or 21 days.
    • You receive your next paycheque, but your other bills have come due and you need the pay to pay for those obligations.
    • You’re unable to pay back the payday loan – what do you do?

    For most people, the answer is take to out another payday loan, which creates an unending cycle of paying off debt with more debt.

    During the COVID-19 pandemic, payday loans are even more unsustainable. If your income has been affected, you may not have another paycheque to find the funds, or you could be dipping into emergency help benefits, such as CERB payments.

    Where to Get Online Debt Help During the COVID-19 Pandemic

    There are other options to get out of debt besides payday loans.

    You might consider:

    • Budget management.
    • Financial restructuring or debt consolidation.
    • Settling outstanding debts.
    • Refinancing your mortgage.
    • Special programs (such as the access DebtCare Canada provides to a program that can resolve a CRA back tax problem).
    • Filing for insolvency – bankruptcy or a consumer proposal.
    • And more.

    The exact options will depend on your situation. At DebtCare Canada, our consultants look at your whole financial picture to find the best solution for you.

    During COVID-19, you’ll need to get online debt help to maintain physical distancing. DebtCare has been able to operate 100% remotely since the start of the pandemic. You can book a free consultation by:

    • Calling 1-888-890-0888
    • Texting “HELP” to 1-888-890-0888
    • Visiting 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.

  • Two Ways to Get Out of Debt in 5 Years or Less

    What is the best way to get out of debt fast?

    Unfortunately, when it comes to debt there is rarely an easy way out. You likely didn’t get into debt overnight, so it’s going to take some time to regain your financial freedom. But there are options that can significantly speed up the process.

    We’re looking at two of these options: filing for a consumer proposal and securing second mortgage financing. Read on to determine if one would work for you.

    1. Consumer Proposal

    In a consumer proposal, an offer is made to your creditors to repay a portion of what you owe in lieu of the whole payment.

    A consumer proposal is generally termed over five years. It is suitable for someone who is loaded in debt, making minimum payments, has defaulted on debt, or is having problems managing payments. It stops collection action and interest.

    You might be eligible for a consumer proposal if you:

    • Have under $250,000 in debt (excluding your mortgage).
    • Are a higher-income earner who has gotten into a bad financial position.
    • Are a homeowner with some equity available.

    However, filing for a consumer proposal has its downsides, too. For one thing, it can critically affect your credit score, making it extremely difficult to qualify for credit for years after the fact. It must also be filed through a Licensed Insolvency Trustee (LIT, or formerly known as a bankruptcy trustee) who takes a portion of what you pay. And there is no guarantee that the majority of your creditors will accept your proposal; you have to prove that this option would be more lucrative for them than if you filed for bankruptcy instead.

    If you’re considering filing for a consumer proposal, it’s best to seek the advice of a qualified debt consultant who represents you and isn’t making income off of your consumer proposal.

    1. Second Mortgage Financing

    If you’re a homeowner, securing a second mortgage might be available to you.

    A second mortgage doesn’t affect the first mortgage and it can be amortized over five years to see you out of debt, without stretching out over 25 years like your first mortgage.

    It’s best suited to those with home equity (at least 20% to 30%) and good credit. If your credit score is low, but you have equity, there may still be a lender who can help but it likely won’t be a prime lender.

    A second mortgage can be a good way to consolidate debt, so long as you can make the payments on time. It can allow you to pay off your other outstanding debts and only have one monthly payment. Second mortgages typically carry a higher interest rate than first mortgages, but the rate is still often lower than the interest you might have from credit cards, car lease payments, or unsecured lines of credit.

    If your debt is so large that it couldn’t be paid off with a second mortgage, or you’re not eligible for one, then filing for a consumer proposal might still be your best option.

    You don’t have to assess your financial situation alone. Handle everything in one place and get your financial advice from someone who represents you and can deploy all financial solutions.

    At DebtCare Canada we have financial programs that offer help to people with all types of credit and income. We can help you secure a second mortgage, represent you while filing for a consumer proposal, or explore other debt consolidation options.

    Contact us today for a free consultation. Call 1-888-890-0888.

  • Get Out of Debt: Structure Your Second Mortgage as a Loan

    debt2When you’re struggling to meet your monthly payments and constantly stressing over those credit card bills, it may be difficult to move outside of that bubble and remember that, if you’re a homeowner with equity, you have a very valuable resource just sitting there. Many homeowners don’t realize that their homes are one of the least expensive ways out of debt. That is, depending on how you structure your loan.

    First mortgage refinancing to get out of debt: many people make the mistake of refinancing a first mortgage just to pay a small amount of debt. Since refinancing can mean fees and penalties, or an amortization period that takes you 20-25 years into the future, this isn’t exactly the most financially sound option.

    Using a home with significant equity can be a really smart way to get out of debt – and it doesn’t need to take you out of your financial comfort zone or take 20 years to pay off.

    You can actually structure a second mortgage as a loan and it can stand alone from your first mortgage – second mortgages have slightly higher rates but in the end you can end up paying less depending on how you structure your loan.

    For example, if you borrow $20,000 at 12% interest, your monthly payment based on a 5 year-amortization is less than $450 per month and the debt is completely paid off within 5 years! This means that you roll all of those smaller debts (with sky high interest rates) into one monthly payment, getting rid of all of the additional interest – and stress!

    However, where you can end up paying through the nose is when you structure that second mortgage and amortize your payments over 20-25 years. Here you are paying that same rate of interest for a much longer period of time – so although monthly payments are smaller, the end result is a much larger balance due to accumulated interest.

    When it comes to solutions to help you get out of debt, your home is a valuable asset – why not take advantage of it? Get rid of the credit card debt with a second mortgage – one monthly payment and far less interest. It just makes sense.

    If you don’t own your home, or don’t have much equity, obviously this isn’t really an option. That doesn’t mean solutions don’t exist. If you want to know what they are, we can help with that too.

    For more about how to use your home to get out of debt, or for other debt solutions, call DebtCare today. We can help: 1-888-890-0888.

     

  • Ontario Bankruptcy Trustees – Who They Are and How They Advertise!

    debt careDebt consolidation, get out of debt, debt relief: it is hard to turn on the radio or television these days and not hear one or all of these phrases. Why? Because so many Canadians are facing financial challenges thanks to the ease with which credit is granted coupled with high (credit card) interest. The temptation to pay on credit can quickly lead to getting in over your head, and then struggling to find a solution.

    When it comes down to it, the question is, who advertises these solutions and what do they do?
    Ontario bankruptcy trustees, more aggressively now than ever before, are advertising to the public that they offer the best solution for people facing financial woes. We disagree with much of the advertising we hear from many Ontario Bankruptcy Trustees. Why? Because we exist because of them!

    Ontario bankruptcy trustees promote financial solutions. However, if you choose the solutions offered, the Ontario bankruptcy trustee does not represent you. A bankruptcy trustee in Canada is a court appointed officer who administers estates when a bankruptcy or consumer proposal is filed. They do not represent you, they do not represent your creditors. They apply rules set out in the Bankruptcy and Insolvency Act. The trustee is required to represent the best interests of all parties (and this includes their own financial interests).

    What does this mean? Well, trustees are paid a tariff out of the proceeds of your bankruptcy or consumer proposal. In the case of bankruptcy the fee is fixed, whereas with a consumer proposal the fee grows with the amount of the proposal.

    Some things to know:
    • Trustees advertise to you, despite the fact that they don’t represent you – this is because without you, they have no business.
    • In the case of bankruptcy, finding surplus income means that they can extend your bankruptcy and collect larger tariffs because the bankruptcy is being administered for a longer period of time.
    • In the case of consumer proposals, convincing you to propose a higher amount to your creditors will result in the collection of more fees – and thus is a major priority for them.

    Now, of course a few bad apples shouldn’t spoil the whole bunch, and we don’t mean to say that all trustees are shady. Many trustees in bankruptcy are reputable and do business above board – but the few that don’t can do a lot of damage. There are just too many conflicts of interest and the law needs to go further in terms of requiring trustees to state in their advertising that while they are promoting a service they don’t represent you.

    A consumer proposal or bankruptcy is often a really good financial solution for someone backed into a corner. These allow for one monthly payment, can reduce debt, stop interest, and stop collections. Just keep in mind, just as you wouldn’t go to a meeting at the CRA without your accountant, you shouldn’t go to a trustee without your own independent financial representation.

    Financial counsellors who specialize in bankruptcy and proposals can structure the numbers, review your information, make recommendations, and bring a proposal forward to a trustee on your behalf- protecting you throughout the entire process.

    DebtCare Canada represents your best interests – yours and yours alone. Call us today BEFORE contacting a trustee: 1-888-890-0888.

  • Making Your House Work For You: Mortgage Refinancing to Get Out of Debt

    Mortgage RefinancingDebt: that one little word that elicits a number of intense feelings, usually all of which are negative. Debt is a fact of life, and unless you have been incredibly financially savvy and have managed to curb any spending that is outside your monthly intake, you are likely in some sort of debt. This may be manageable (automotive financing or a mortgage) or it could be overwhelming (numerous credit cards, personal loans, etc.). If you are in the latter position, ignoring a debt is the quickest way to get into further financial trouble.

    Wait. Stop letting that debt rule your life – it doesn’t have to, and letting it continue to do so will likely only make matters worse. You have some incredibly effective options available to you – one of which might be mortgage refinancing.

    Mortgage refinancing: simply put, mortgage refinancing involves swapping out an old mortgage for a new one (hopefully better), and then paying off the old loan with the new one. It is different from a second mortgage because, as mentioned, you are essentially paying off the first mortgage in full.

    If you are considering mortgage refinancing as a means to get out of debt, here are some important things to remember:

    1. You have to own a home to do this (obviously). Since you are increasing the lending limit on your current mortgage, a mortgage needs to exist in order to apply. You cannot obtain a new mortgage strictly to consolidate debt – to do this you need a personal loan or line of credit.
    2. Your credit needs to be in good standing. If you are maxed out or have several missed payments, and as a result your credit score is low and your report reflects this, your lending institution isn’t necessarily going to have much faith in your ability to repay your debt.
    3. Canadian Mortgage and Housing Corporation guidelines have set the total refinancing limit for mortgages at 80% of a home’s value, so if, once your mortgage is refinanced, you would owe more than 80% of that value, a total consolidation of your debts will not be possible.

    Considered these caveats and still think mortgage refinancing might be an intelligent route? That is great – now what? Your best choice is to visit a debt solutions specialist to discuss the process, one who can assist you in applying and eventually getting your finances back on track.

    If mortgage financing isn’t an option for you, that same debt specialist can sit down with you and discuss the other options available – you don’t have to do this alone.

    For more about mortgage refinancing or to learn about the various debt relief solutions out there, please contact DebtCare Canada today by calling 1-888-890-0888.

  • Know the Difference: Secured Versus Unsecured Debt

    IUnsecured Debtn the world of finance, there are so many different types of debt that it can be really tough to wrap your head around those differences. Furthermore, when you find yourself struggling to make the minimum payments or trying diligently to get out of debt those subtle differences can be easy to ignore. In an effort to help you make some sense of those differences, we thought we’d take the time to explain two of the most common types, secured and unsecured debt, and what those differences mean to you.

    Secured Debt: When a debt is secured, this means that an asset has been used as collateral when borrowing the money. This gives the lender more security and reduces his/her risk against default. When you take out a secured debt, but fail to make payments on it, the lender then has a recourse to secure the money owed (usually that means selling that asset to recover the losses).

    For most people, the largest secured loan is a mortgage. When you take out a mortgage, this loan is secured by the house itself. However, there are several other types of common secured debts, including car loans or loans secured by investments (i.e. property).

    In bankruptcy, most secured loans are not released, meaning they are not covered by the bankruptcy contract, and thus if you claim bankruptcy these are not included in the term or payments.

    Unsecured Debt: When a debt is unsecured, this typically means that there is no security behind a loan, and thus the lender runs a higher risk of not recovering their money if you default on a loan. Since there is more risk, this usually means that the interest rate on unsecured debt is significantly higher than secured debt.

    There are several types of unsecured debt, but the most common is credit card debt. Other types include student loans, payday loans, or other bills (i.e. utilities).

    Unlike a secured debt where your creditor can just use the collateral to recoup their losses, with unsecured debt this is not an option. However, they may use other avenues, such as a collection agency, garnishing your wages, or placing a lien on your assets until you have paid off the debt.

    In bankruptcy, these are the types of debts that are included, and thus wiped out in exchange for a monthly payment in bankruptcy.

    When you are in debt, it usually makes sense to pay off more of those secured debts first because there is often more to lose if you default on these. However, when looking to make larger than minimum payments, start with the unsecured debts because they often carry much higher interest rates.

    For more about secured vs. unsecured debt, and how to prioritize when trying to get out of debt, please contact DebtCare Canada today by calling 1-888-890-0888.

  • Take Action to Get Out of Debt: Tips and Tricks

    Get Out of DebtDebt free: a highly attractive yet increasingly unattainable lifestyle for the average Canadian. No matter how you slice it, consumer debt has become a major problem for many individuals, and whether as a result of job loss, divorce, student debt, or just overzealous spending, many now find themselves trying to dig themselves out of a fair-sized financial hole that often seems more like a bottomless pit.

    Ok, wait. We are not just going to saddle you with negatives and not offer some useful advice. We are, after all, here to help. So, with that in mind, here is a realistic list of tips to help you get back on the road to financial freedom.

    1. Make a monthly budget. We absolutely cannot stress this enough. It is the best, really the only, place to start when it comes to ways to get out of debt. Once you realize how much you take in each month, and compare it to how much you spend, you will actually have a better idea where your money is going, and how you can decrease certain amounts. And be realistic – don’t attempt to cut out all spending – no one can do that.
    2. Stick to that budget. Become a savvy shopper and curb needless spending whenever and wherever possible. Look for sales whenever possible and take advantage of money saving incentives.
    3. Stop paying just the minimum payments. Take any money saved thanks to your new budget and put it all on those debts. Since most minimum payments on credit cards are interest, making the minimum payment really is making the minimum payment. Give as much as you can to those creditors.
    4. Work on those high interest credit cards. When you are overwhelmed with credit card debt and trying to decide which debts to eliminate first, always take a look at interest. If one card is 15% interest and another is 25%, think about how much money you are contributing to the principal and how much is just empty interest.
    5. Seek out some debt help. Once you have tried to implement the above changes, but feel as though you are still left in a precarious financial position, it might be time to seek some professional assistance. An organization that can offer you various options to get out of debt might be your best solution.

    Stop struggling and start swimming above water. It can often seem impossible to get out of debt if you are drowning, so start with these 5 tips and see just how far diligence can take you.

    For more tips or for help getting out of debt please contact DebtCare today by calling 1-888-890-0888.

  • Get Out of Debt: Five Easy Steps to Get You Started

    We’ve all heard that myth that dreaming about your teeth falling out means you’re worried about money – but what if Mr. Sandman leaves you checking your teeth every single morning? If money is all you can think about, it might be time to make some changes. Want to get out of debt but just not sure where to start? We can help. Here are 5 tips to help get you started!

    1.     Create a budget and track spending. If you don’t know what you owe, or where your money is going, you can’t realistically make a plan to get out of debt. Inventory your debt totals, create a realistic budget and track your monthly spending in order to motivate and eliminate.

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    2.  Pay more than the minimums. When your credit card bill comes and your minimum payment required is $50, that doesn’t mean that $50 will be taken from your total owing. The majority of this total goes right to interest, so stop paying only the minimum on your credit cards and pump up those payments as much as you can!

    3.     Stop spending. Sure, this may seem like common sense, but unless you actually do it you are not fixing anything. Look back at that tracker and identify areas that could benefit from a slash. Or, if you can’t seem to resist temptation, get rid of that credit card, take it out of your wallet, or find another effective way to stop using it!

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    4.     Get debt help. Worried that you can’t tackle your debt on your own? You don’t have to. Dealing with debt can be tough, so why not research and get in touch with a reputable, professional debt management firm. There you can get advice on debt relief or find out more about solutions to actually get rid of the money owed.

    5.     Stay focused. Don’t just say you are going to get out of debt – do it. Stay focused on the end goal, not on how tough it is to get there –most good things don’t come easy! Use your monthly tracker (and those decreasing numbers) as motivation!

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    Get your debt under control and eliminate your financial stress with these tips. Take it one step at a time and that mountain will soon become a molehill!

    For more debt reduction tips please contact DebtCare Canada by calling 1 (888) 890-0888 or visit us online at www.debtcare.ca