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.

2. 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.