Tuesday, 26 July 2011

Canadian Debt Consolidation Pros and Cons

Canadian Debt Consolidation options are vast, especially in urban centres like Toronto. It seems that everywhere we turn there is an advertisement about debt consolidation.

What exactly is debt consolidation? This is an important question because while “technically” it involves making a single payment to deal with all of your debt, depending on the type of debt consolidation, it can result in endless payments and destruction of your credit.

Traditionally a debt consolidation included going to a bank or other lender, obtaining a loan, paying all of your debts in full and then making a single payment to a new creditor.

In the past few years different federal government programs have been introduced that provide immediate debt relief and involve making a single payment to a single company – but these debt consolidations do not involve paying off creditors in full. We call these “Debt Relief” debt consolidations.

Debt relief and debt consolidations are meant to be used if you have major financial problems. They involve freezing interest, reducing debt and making a single payment monthly that fits within your current budget. They also come with tough financial choices that include not honouring your agreements to your creditors and damaging your credit (if you haven’t already); this is an important consideration.

Credit counsellors provide similar types of “Debt relief” consolidation programs. Consolidation programs offered through credit counselling will damage your credit. Unlike programs that have been made available by the federal government these programs may freeze your interest but in most cases will not involve freezing your principal debt.

Traditional consolidation loans still exist, but are harder to come by. Most banks (if you qualify) will always offer a line of credit as a first debt consolidation option. These generally carry low interest rates, however they are like taking out a large credit card and are very challenging to pay off because of the monthly interest payments. If you have a lot of debt, the interest may represent a large amount of your minimum payments.

Many folks also use mortgage agents and mortgage brokers to deal with debt. This is also a good choice because the interest is low. Who you deal with to arrange your mortgage will determine the deal you get. To get the best deal it is imperative to deal with a broker who can handle all types of credit and financial circumstances. If you deal with a broker who primarily manages banks – you may find their attitude towards you change if you don’t qualify with the bank.

The best choice you can make is to have a strong relationship with a good financial consultant. Not a debt counsellor, not a bank, not a broker – a financial consultant. They will be able to look impartially at the state of your finances and help guide you through good financial choices that address your short term and long term financial goals.

For more information about Canadian Debt Consolidation pros and cons please visit http://www.debtcare.ca/

Monday, 18 July 2011

Getting Rid of Debt without Declaring Bankruptcy and without Losing Your House and Car

The good news is that in Canada the economy seems to be looking up. People are going back to work and bankruptcy rates are down; however some families are left picking up the pieces. The pieces left to be picked up include accumulated debt, a record of late payments and bruised credit. It could be worse; you could have been one of the thousands of Canadians forced into bankruptcy during the recent recession.

The reason that bankruptcy rates in Canada are on the decline is two-fold.

One cause is recent changes to the Bankruptcy Act in Canada. The changes make it much more difficult, much more expensive and a much longer process to file for bankruptcy.

Another reason that bankruptcy rates are declining is that Canadians generally have been more optimistic about the economic outlook in Canada and are looking for other ways to deal with their debt. While it is nice right now that things are looking up, historically low interest rates are what continue to prop up the economy.

Interest rates have nowhere else to go but up. The is the natural course – as the economy improves, interest rates rise; if the economy falters, interest rates are frozen or reduced – this we saw in the recent recession and continue to experience post-recession.

Last year in addition to changing bankruptcy laws, they tightened lending requirements on CMHC insured mortgage products in an effort to force Canadians to borrow more responsibly. The Bank of Canada and major banks continue to release opinions concerning the high levels of debt that Canadians are carrying.

Another reason that bankruptcy rates are declining is that Canadians have more options than ever to deal with debt. There are many different types of companies that promote solutions to consolidate debt and/or get out of debt. The tricky part is figuring out which one you should deal with.

Banks who promote consolidation loans require good credit and often involve consolidating the debt into a single payment but they do not provide meaningful long-term strategies to get the debt paid off. Why? Because as long as you have the debt they are earning interest.

Finance companies offer consolidation loans but the interest rates often exceed 20%. Mortgage brokers offer mortgage options to consolidate debt; these options can involve stretching your debt out over 15, 20 or even 30 years.

Credit counsellors, debt counselling companies and trustees may offer options that can provide immediate debt relief – however they often won’t highlight how these options will destroy your credit.

We are the first organization to offer a program to consumers that it not one-dimensional. We can access all of the resources listed above and more. Financial Consulting is an emerging industry that involves helping consumers work through all of the solutions that are available to them. For more information about getting rid of debt without declaring bankruptcy please visit http://www.debtcare.ca/

Monday, 11 July 2011

Collection Agency Harassment is Common and You Can Stop It

The number one tactic that collection agencies employ to entice you to negotiate with them is by simply harassing you, every which way.

In extreme cases we have had clients tell us about collection agencies who have used the following aggressive collection tactics to force a dialog:

- Sending an abundance of mail with collection agency letterhead to the residence

- Sending mail to the consumer at work

- Calling the consumer at work and/or leaving messages with co-workers

- Contacting the consumers payroll department

- Leaving descriptive messages on the consumers voice mail

- Calling the consumer multiple times daily, even at night and on Sundays

Especially in Ontario, there are a number of protections in place that protect consumers from “over the top” collection agency tactics. The Ministry of Consumer Services regulates collection agencies and the Ministry of Consumer Services licenses all collectors in the Province of Ontario.

When a consumer has a problem with a collection agency they can file a complaint against the collector personally or against the collection agency. If the Ministry agrees that you have a valid complaint they will write to the collection agency requesting a response. Depending on the response, the Ministry will continue to pursue the complaint until a satisfactory solution is reached.

Here is one example of an existing rule that applies to “third party disclosure”. A collection agency cannot provide information about you or your dealings with them to any third party. If a collection agency phoned you at home and your brother answered the phone and the collection agency told him to “have you call them back about your credit card debt”, this would be a third party disclosure violation.

An answering machine is also considered a third party. In many households many people have access to a single answering machine. Collection agencies are not permitted to leave details about your dealings with them on an answering machine. A co-worker is yet another example of a third-party.

If the fact of the matter is that you simply cannot pay your debt, there are steps you can take to ensure that the collection agency treats you fairly. With that said, the fastest way to get a collection agency off your back is by dealing with the debt. You can do this a number of ways: through a debt consolidation, through credit counselling or through government programs.

Coming up with a strategy to deal with your debt will put you on course to get the collection agencies out of your life and start working towards better financial help. For more information about collection agency harassment and what you can do to deal with debt that is in collections, visit http://www.debtcare.ca/

Monday, 4 July 2011

Collection Agencies in Toronto Can be Stopped Using the Collection Agencies Act

Collection agencies represent companies who have a debt to collect. In most cases collection agencies represent creditors collecting on loans and other credit debt. That being said, many other companies will also employ the services of collection agencies. Utilities, payday loan providers, telecommunication companies, gyms and dentists are all examples of private companies that use collection agencies to collect debt on their behalf.

In heavily populated centres, such as Toronto, there are many collection agencies to be found. Nordon, Collect Corp., Total Debt Recovery, Financial Debt Recovery, and CBV Collections are just a few of the collection agencies that operate in Toronto. There are more than 20 collection agencies located in the GTA.

Collection agencies will employ any number of tactics to collect money from you. These could include frequent phone calls, at home or at work, writing to you at work, placing a “collection item” on your credit report or, with authorization, they may even file a claim against you in Small Claims Court on behalf of their client.

As scary as it seems, believe it or not, if you are having problems with a collection agency in Ontario there is legislation and there are government protections in place that mandate what a collection agency can and cannot do.

Here are a few tips:

You can go to the E-Laws website and search for “The Collection Agencies Act”. There you will find the legislation that regulates Collection Agency conduct and you can learn more about your rights.

You can visit the Ministry of Consumer Services website. The Ministry of Consumer Services (MCS) regulates collection agencies in Ontario and arbitrates complaints from the public. On the MCS website you can learn more about your rights and can even initiate a complaint online.

You can request your credit report online on the Equifax Website. If a collection agency has registered a collection item on your credit report, it will remain on your credit report for 3 years from the date it has been settled or paid in full. If the collection item resulted from a defaulted loan or credit card, the trade line registered by the creditor will remain in a defaulted status for 6 years from the date it is paid or settled in full.

There are a number of programs that are available through the Canadian Government specifically designed to stop collection agencies in their tracks. These programs depend on the individual’s personal and financial circumstances.

If the stress of dealing with collection agencies has become too much, you can use a financial consultant to get in between you and the collection agencies, providing you with financial relief. This is by far the most painless route. A financial consultant that specializes in negotiating with collection agencies will know exactly what to do. For more information about how to deal with collection agencies please visit http://www.debtcare.ca/