Monday, 23 December 2013

Investment Advisors: Keep Clients’ Investments Protected with a Debt Management Company


As a financial or investment advisor your clients look to you for protection: to protect their family in the event of a death, to protect their wealth, to protect themselves when the time comes to retire and more…  You are often the first person that a client will turn to in good times and bad. Sometimes people fall on hard financial times. A divorce, a job loss or even taking a tumble in the stock market can see someone who was otherwise on solid financial footing finding it difficult to make ends meet. 

Most people want to do the right thing! They want to pay their bills, provide for their families and no one wants to make tough financial choices when they fall on hard times.

Unfortunately, sometimes difficult financial times lead people to make the wrong financial choices. All too often we see people who have a tax problem or excessive debts owed to creditors coming to us after they have liquidated their investments, giving all their money to their creditors in an effort to pay their obligations – yet they still find themselves owing more than they can pay, leading them to file a consumer proposal.

The challenge with this is that most people don’t know that even in a consumer proposal many of their assets like their home, vehicle and yes some investments like RRSPs can be legally protected.

Oftentimes people see a consumer proposal as a last resort – when really it is a viable option for getting out of debt that leads to quick recovery times where credit is concerned. If you have a client with financial problems the best thing to do is get them an unbiased financial evaluation from a financial consultant that specializes in consumer proposals. This way all options can be presented and strong contingency plans can be put in place which will better protect your client in the long run.

Another common occurrence is financial and investment advisors who don’t understand insolvency and submit their clients right into the clutches of a trustee in bankruptcy. This could be a big mistake. When you send your client directly to a trustee, your client is not the trustee’s client – they actually represent the interests of your client’s creditors. With that said, without your client they would not be in business so there is a high motivation to make your client feel secure and sell their services. While they may make your client feel secure at the time that they sign on the dotted line it doesn’t mean your client is safe, and the story at the time of signing can change later.

Financial consultants offer a wide range of financial services so they can present all options. Forging a strong relationship with a good financial consultant who specializes in consumer proposals will provide you and your clients with huge value in the long run.
 
For more information about how financial consultants can help you to protect your clients please call Michael Goldenberg at DebtCare at 416-907-2582 or visit www.debtcare.ca.

Monday, 16 December 2013

Don’t Be Fooled: The Truth About Pay Day Loans


In the world of credit, a payday loan has become an increasingly popular form of financial funding. The ease with which they can be obtained makes them seem attractive to many who need quick cash. The ability to walk into a payday loan location and walk out with cash can be very tempting – but beware. This week’s school for debt relief is all about the truth about pay day loans. 

What is a pay day loan? Pay day loans are those loans given by an institution that is not a bank, and are generally short term. They are called payday loans because the borrower typically borrows just enough money to get through to the next payday, at which time repayment is due. 

These are just short term loans, so what’s the harm? Well, when you take out a pay day loan you are agreeing to pay back the full amount in a very short period of time (usually by the time you next get paid), coupled with a fee that can range from 20 to up to 500 percent.  

Think about it this way: Let’s say your car breaks down and the total cost of the bill is $1000 (unfortunately a very common occurrence). However, your finances are tight right now so that $1000 is not readily available but you can’t get to work without your car. So you decide to go to a pay day loan company to borrow that $1000 for a period of 1 month. Let’s say that company charges $20 per $100 borrowed (a typical fee). That means that on top of the $1000 you owe $200 in fees. So, at the end of the loan period you owe $1200. Hmmm, if you didn’t have that extra $1000 at the beginning for the month, are you likely to have it at the end. So you roll it over, getting charged an extra $200 for a month’s extension…the loan doesn’t seem so small now, does it?

If you require a short term loan, initially pay day loans can seem very attractive. But once you have broken them down and added the fees and interest, it is clear why these credit products are less than beneficial, no matter how you look at it. Pay day loans should be avoided at all costs – their costs to you are just too high. 

If you have found yourself stuck in a pay day loan cycle and need help getting out please contact DebtCare Canada today by calling 1-888-890-0888.

Tuesday, 10 December 2013

Be in the Know: Checking and Understanding Your Credit Score


No matter the state of your finances, understanding your credit score is a very important part of keeping financially fit. This is especially important when you are dealing with debt or attempting to rebuild credit.  Not knowing what certain aspects of your credit score represent can lead to trouble acquiring credit products, or errors not reported can be incredibly difficult to deal with.

Understanding your credit score. Firstly, what is your credit score? This is the number applied by one of the major credit reporting agencies, derived from a complex calculation of your financial behaviour, most importantly your borrowing behaviour. This includes where you have borrowed from, how much you have borrowed, and your repayment habits. Credit products such as credit cards, personal loans, mortgages, car loans, even personal cell phone contracts are included in this calculation. 

So what does the score mean? When you (or a potential creditor) request your credit score, this is the number that represents those above calculations. Your number will be on a scale from 300 to 900. 300 is the lowest score, and represents credit that is in very poor standing. 900 is the highest score, and represent pristine credit behaviour. 

This is how national credit reporting agency Equifax ranks scores:

-        300-559 – poor
-        560-660 – fair
-        660-724 – good
-        725-759 – very good
-        760+ - excellent

Your credit score will fall into one of these 5 categories, and it is based partially on this number that a creditor will decide whether or not to extend credit to you.

What impacts your credit score? Anything that you do financially with regard to credit gets reported. This includes any new credit products you obtain, payments made and payments late or missed, any credit inquiries made both by you or a potential creditor, as well as any debt reduction strategies, including claiming bankruptcy or a consumer proposal.

Once you are better equipped to understand your credit score you might be concerned about what this number means. But don’t worry. If your credit score is less than stellar you should work on changing this – it just might mean seeking out some help. Getting rid of debt and ensuring that your monthly financial obligations are met – on time, every month – is a great place to start. Halting any further credit seeking is also a good idea.

Your credit score changes all the time, based on how you behave credit-wise, so be sure to keep that in mind. If you need help getting that number back up, or want help getting rid of your debt so that you can focus on increasing your score, consider working with a professional debt solutions company.

For more information about understanding your credit score and how to get it out of the red please contact DebtCare Canada today by calling 1-888-890-0888.

Tuesday, 3 December 2013

Debt Consolidation Through Mortgage Refinancing – The Right Choice for You?


With the consumer debt levels in Canada reaching all-time highs over the last few years, money (or perhaps a lack of money) has been a common topic of conversation. As a result, debt relief is also a common subject, and it seems that no matter where you turn these days, debt reduction is the topic of the day. And one of the debt reduction solutions that is becoming increasingly popular is mortgage refinancing. 

If you are in debt and considering refinancing your mortgage to get out of it, it might be a smart choice. Many homeowners struggling with debt see mortgage refinancing as an attractive option for various reasons. Firstly, mortgage interest is usually far lower than credit card interest (one of the main types of consumer debt) – sometimes by as much as 20%. By paying off one with the other you can end up saving a ton in interest. Secondly, this works to consolidate all of those different monthly payments into one neat, tidy sum – far easier to track and pay (only past balances though, not charges made after the consolidation). It is really no surprise that mortgage refinancing seems enticing, is it?

However, mortgage refinancing to consolidate debt isn’t the right option for everyone. Of course, if you don’t own a home, this option isn’t going to work for you. But even if you do, it may not work for several reasons. To begin with, Canadian Mortgage and Housing Corporation (CMHC) guidelines have made it more difficult than previously for homeowners to refinance. Changes to these guidelines mean that CMHC will only insure a refinance of up to 80% of a home’s value, so if your debt means that you will exceed this 80%, the option may not be the one for you. Furthermore, in order to find approval for mortgage refinancing your credit has to be in great shape. Anything less than pristine is usually an automatic no.

If you meet the requirements and can consolidate your debt by refinancing your mortgage, then by all means, get to it! As mentioned, for some people this is the most intelligent debt reduction strategy available. However, if you are worried that your current debts will exceed the maximum amount allowed by CMHC or if your credit is less than stellar, it might be time to consider some other options. A great place to start to discuss the various solutions that would exist – and how they would work for your unique circumstances – is a debt reduction company, one that has the experience and knowledge to help you get out of debt.

For more information about refinancing your mortgage for debt consolidation, or to find out about the other debt reduction strategies available, please contact DebtCare Canada today by calling 1-888-890-0888 or visit www.debtcare.ca

Tuesday, 26 November 2013

Bankruptcy Trustee – Recognizing their Role


If you are drowning in debt and having trouble making even the minimum payment on any of your cards – or worse, not making them - it might be time to admit that you have a debt problem. Ignoring this problem will only end up making things worse, and so avoidance should never be an option. For many in this position the best solution is bankruptcy – but how does one know who to turn to when this is the case – who can you trust? It is very important when making this type of financial decision to understand the role of a bankruptcy trustee and the part they play in your financial future. 

What is a bankruptcy trustee? Bankruptcy is a legal process and must be handled by a licensed professional, a bankruptcy trustee. This is the individual who will administer your bankruptcy or consumer proposal and manage your assets held in trust. This individual can also provide advice and assistance to make sure both your rights and your creditor’s rights are protected. They are an objective party – their role is to remain impartial throughout the process, acting in both parties’ best interests.

A bankruptcy trustee has several jobs. The first main job is to repay your creditors – this is done by selling your assets. This includes negotiations with your creditors as far as settlements. A bankruptcy trustee may also provide debt counselling or put you in contact with an insolvency lawyer if deemed necessary.  During your bankruptcy, a bankruptcy trustee is the person who monitors your activities and ultimately decides when you can be discharged. For example, if your financial situation changes and your income now leaves room for surplus income, a bankruptcy trustee may determine that a longer term may be necessary before discharge.

Can you trust a bankruptcy trustee? The short answer is yes – they are licensed and regulated by the Superintendent of Bankruptcy, their actions monitored and any questionable behaviour is addressed. Their goal should ultimately be to help get you out of the financial pickle you are in – and most adhere to this. All of this being said, it is sometimes best to visit a professional debt solutions company first – that way you can be sure that all avenues have been examined before entering into bankruptcy, and if the end conclusion is to file, they can put you in touch with one that is trusted and respected.

For more information about bankruptcy and the role of a bankruptcy trustee, please contact DebtCare Canada today at 1-888-890-0888 or visit www.debtcare.ca

Monday, 18 November 2013

Prepare for the Coming Holidays with a Debt Reduction Plan that Works!


With the holidays quickly approaching, the dollar signs may quickly begin to add up – this time of year never fails to leave the wallet feeling just a tad lighter. When you are in debt, the excitement brought on by this time of year can rapidly be overshadowed by the stress that comes with having to spend when sometimes spending isn’t the best idea for your bank account. In the spirit of giving, here are some pre-holiday debt reduction tips that may just help you ease that stress and allow you to enjoy the season. 

1.      Stop avoiding. Just because you ignore that fact that you have debt doesn’t mean it isn’t there – and avoiding it is not going to make it magically disappear – if anything this will just tempt you to continue spending. Be proactive and admit that you need to get on top of your debt reduction plan.
2.      Establish a debt reduction plan. Yes, you need to sit down and think about your financial goals for the next year, 2 years and 5 years. Getting rid of debt in a month is not feasible for most individuals, so don’t be unrealistic. However, jumping in head first without a plan may just leave you worse off than when you started.
3.      Set a budget – for both monthly spending and holiday spending. Monthly – again, be realistic, but starting a budget may mean cutting out some luxuries that are not really necessary. For example, you may not need to eat out or order in dinner once a week, but be realistic – don’t cut it out altogether. With holiday spending, set maximums. Maybe it means doing a gift exchange by drawing names, rather than buying something for everyone.
4.     Stop using the cards. This may be difficult, but remember, if you can’t pay cash you really can’t afford it. Stop purchasing on credit if you can avoid it. Since it is likely this spending that got you into trouble to begin with, quit it.
5.      Seek out debt help. You don’t have to do it alone. One of the best ways to get your finances back on track is to seek out the assistance of a professional, someone who can work through all of the roadblocks and speed-bumps and help you on a path to becoming financially fit. The solutions may include things like credit counselling, consolidation, or a consumer proposal or bankruptcy – it will depend on your own unique financial situation.
When you are in debt and feel like there is no light at the end of the tunnel, just remember: getting out of debt may take time, but it is possible. Use these tips to help ease the stress caused by debt and take back control of your money. 

For more tips on developing a debt reduction plan before the holidays get underway please contact DebtCare Canada at 1-888-890-0888 or visit www.debtcare.ca.

 

Tuesday, 12 November 2013

How Investment Advisors Can Better Protect Clients’ Portfolios in a Consumer Proposal


When we think about making investments there are so many products to choose from. Whole life insurance, segregated funds, TFSA’s, RIF’s, mutual funds and more… Financial and Investment advisors representing clients considering investments know that they are entrusting them to help them best gain a positive yield, balance risk and also consider their long term financial well-being. 

When the economy is great and times are good people are in the mood to invest. Sometimes though the economy can take a turn for the worse and aside from the fact that your clients may not be in the mood to invest for a while, they may find themselves in other financial trouble. 

While the Canadian economy performed well during the last recession it is a known fact that Canadian households are carrying significant debt, in excess of $40k per household, on average. When financial times are tough – someone loses a job, a divorce takes place, etc. - usually unsecured debt is the first thing to be sacrificed – it is easy to stop making payments on these in an effort to meet other financial responsibilities.  

This is one reason why it pays for financial advisors and financial planners to have a strong relationship with companies who are equipped to guide their clients through tough financial times. Most people don’t know that many investments are actually protected through a consumer proposal or bankruptcy. Consumer proposals are an excellent way to gain legal protection for a client who is having a serious financial problem and help them retain their assets, such as their home, vehicle and some investments including RRSPs.

The challenge is that some financial and investment advisors send their clients directly to bankruptcy trustees in these circumstance which can be a huge mistake. Trustees have an obligation to protect the interest of your clients’ creditors. In the case of consumer proposals the fee is earned based on the amount of the consumer proposal. The more that they secure for your clients’ creditors, the better.

When you work with a debt consultant, the debt consultant represents your client. This means that the client receives a safe review of their income and assets and can have things structured before seeing the trustee to sign on the dotted line. This enables your clients to have areas of concern identified and addressed before these issues can impact their ability to get protection.

We all want to ensure the best for our clients so just referring your client to any debt counsellor to help is not necessarily the right answer either. Like your industry, there are good advisors and bad ones. It is prudent to interview and forge a relationship with a debt consultant that you can trust to refer your clients to.

For more information about how you can better protect your clients’ portfolios please contact Michael Goldenberg, president of DebtCare at 416-907-2582 or visit www.debtcare.ca.

Tuesday, 5 November 2013

Beware of Imitations – Debt Consolidation Companies and You


It is very common, no matter where you go, to hear commercials or radio ads talking to you about debt. With consumer debt levels as high as they are in Canada, it comes as no surprise that many Canadians are looking for a way to help ease their financial worries by getting rid of some of that debt – and debt reduction or debt companies are offering this help. Unfortunately this umbrella term encompasses both those companies who genuinely want to assist you in getting your debt under control and those with less than virtuous objectives.  

Firstly, what is a debt consolidation company (or rather, the right kind of debt consolidation company)? A reputable company can help you get rid of your debt in a way that not only protects you, but helps you regain control of your debt. The possible solutions may include consolidating your debt, mortgage refinancing, bankruptcy or a consumer proposal – but whatever the solution, it should be based on your own unique situation. The company should not require full payment of a set amount before paying off creditors, and should not hold fast to only one type of debt reduction plan. 

When you struggle with debt, the last thing you need is someone taking advantage of that vulnerability. Thankfully, the Ontario government has stepped in to help reduce that likelihood. Earlier this year, the Ministry of Consumer Services took a step to help protect consumers from the unfair business practices of those companies claiming to offer debt relief services. This commitment included new rules put in place outlining appropriate and acceptable behaviour.

Here are a few of the rules that companies must adhere to:

-        No company may charge upfront fees
      -        Fees charged to consumers cannot go above a specified amount
      -        Contracts must be clear and easily understood
      -        Consumers must be given (and informed about) a 10-day ‘cooling-off’ period, during which they can consider the agreement and change their mind if so desired

Any company not complying with these new rules will have their license revoked.
 
All of this being said, there are still a number of companies out there that try to skirt the rules and remain persistent in their attempts to put their needs before yours. If you are looking for a debt consolidation company make sure you do your research and find one whose methods are going to actually help you achieve your goals.

For more information, or to speak to a professional debt consolidation company, please contact DebtCare Canada today at 1-888-890-0888.

Tuesday, 22 October 2013

BOO! Don’t Let Your Consumer Debt Scare You – Fix It!


This time of year it is hard not to find yourself celebrating the scary season, whatever that may involve. However, the scare factor should have everything to do with ghouls and goblins – but nothing to do with your consumer debt. If your debt scares you – no matter what time of year it is – it might be time to consider taking control of your finances and getting out of debt.  

What is consumer debt – is it just debt? Well, no. Consumer debt refers to the debt accumulated through purchases which are consumable or do not appreciate in value. Credit products such as credit cards are the main conduit for this type of debt. Debt from other transactions, such as your mortgage, is not considered consumer debt.

Consumer debt is often the most troublesome form of debt, especially when it is debt owed on a credit card. This is because of the high interest rates charged by credit card companies. This interest, often around 20%, can make paying off debt very difficult, especially when you can only afford to make minimum payments. Don’t think it is a major issue? Most credit card statements will give you an approximate timeframe as far as when the debt will be totally paid off by paying only the minimum payments. Take a look at that number – it just might scare you into action.

If you are finding it difficult to decrease your balances, or if you continue to rack them up and then have trouble meeting the minimum payment requirements, a smart idea is to get some help – you don’t have to do it alone. Visiting a debt reduction company with experience helping people deal with debt can help you get things back on track. Your debt reduction solution may involve debt consolidation, credit counselling, a consumer proposal or bankruptcy – it all depends on your individual financial situation. Sitting down with a professional will help you to establish a plan to get things going. This will help to stop or avoid harassing calls from collection agencies and any future (or current) enforcement action, such as wage garnishments or property liens.

Stop ignoring problem consumer debt – and don’t let the thought of dealing with it frighten you. Get the help you need today to get back on the road to financial success.

For more information about dealing with your consumer debt please contact DebtCare Canada today by calling 1-888-890-0888 or visit www.debtcare.ca

Tuesday, 15 October 2013

School For Debt Relief #3: Rebuilding Credit


The beginning of the school year is behind us; students have settled in and teachers have found their groove. This final blog in our school for debt relief series will help get you back on track for the rest of the school year. Once you have worked out your debt repayment plan, stopped the collection calls and gotten your finances righted, it is time to think about rebuilding credit. 

If your debt became problematic in the past, it is highly probable that your credit has taken a hit. Thanks in part to things like missed or late payments, having too much credit or a bankruptcy or consumer proposal, your credit is now very likely at the low end of the scale and you may be finding it very difficult to secure any sort of financial funding. If this is where you currently find yourself it is important to understand that rebuilding your credit takes time, but it is possible. 

Here is our list of the top ways to help rebuild credit.

Apply for a secured credit card. With a secured credit card, you make a deposit on the card which the creditor then holds as a guarantee. This deposit, usually equal to your credit limit, lets you make regular purchases with the card without the lender worrying about security. Having a secured credit card shows up on your credit report, letting other creditors know that you are being responsible with your credit and not spending outside your means.

Make at least the minimum payment. This is crucial, as it may be what brought your credit down in the past. It is always a smart practice with a credit card to try and pay off the entire balance each month – that way you don’t accrue any interest and can’t get in over your head. That being said, if you cannot make the payment in full make sure that you pay at least the minimum, or just a little more if possible. Any missed or late payments will just get that score decreasing again.

Don’t apply for too many credit products. Applying left, right and centre for credit is going to make you look like you are a credit seeker – and this implies that you cannot meet your monthly needs. Also, do not have too many credit products. Just because you have cards with high limits without using them doesn’t mean that your credit will be good. Keep limits low.

Review your statements regularly and check your credit report annually. To avoid mistakes and to ensure your payments are always made on time, review your statements monthly and report any errors immediately. This is also a good rule of thumb with your credit report – it should be checked for errors and those errors reported on at least a yearly basis (but not too often either).

Just because you have had trouble with credit in the past doesn’t meant that it has to haunt you for the rest of your life. Use these tips to help rebuild credit. And remember, Rome wasn’t built in a day; rebuilding credit takes time – just be responsible and think before you spend.

For more information about rebuilding credit or for debt relief please contact DebtCare Canada by calling 1-888-890-0888 or visit www.debtcare.ca

Tuesday, 8 October 2013

School for Debt Relief #2: Bankruptcy vs. Consumer Proposal


This week we are back in the classroom with the second blog in our school for debt relief series, this time to talk about the difference between a bankruptcy and a consumer proposal. These are two very popular forms of debt relief, but before you jump in it is best to fully understand each option. If you feel as though you are drowning in debt and don’t foresee a solution in the future, one of these options may be just what you need. 

 
In Canada, hundreds of people each year choose to deal with their debt through a bankruptcy or consumer proposal. That being said, the two are very different, so we’ve broken things down to help you better understand how these forms of debt relief can help.

Bankruptcy:

Bankruptcy is the legal process that discharges you from most of your debts. This may involve the distribution or selling of some of your assets to pay creditors, but this depends on your own individual situation. The first time you file for bankruptcy, if you do not have any surplus income, you can qualify to be discharged (meaning you have fulfilled your obligations) within 9 months. If there is surplus income, you can be discharged in 21 months. When you file you are required to report to your trustee on a monthly basis, make monthly payments and complete two credit counselling sessions. If, over the course of your bankruptcy, your financial situation changes to the point that surplus income exists, you will be required to pay additional monthly payments until your trustee is satisfied. Once you become discharged, your debts are gone and your obligations are over.

Things you need to know: once you file you can only be discharged by your trustee – it is up to their discretion to decide when obligations have been met. Additionally, attempting to obtain credit after you have filed (and after being discharged) can be significantly impacted. This is because you are now deemed high risk by creditors.

Consumer Proposal:

A consumer proposal is also a legal process which discharges you from your debts, but in a different way. In a consumer proposal, your creditors agree upon a repayment amount, usually significantly less than what you owe, and then you make monthly payments for a set number of months. This pays off only unsecured credit (credit cards, lines of credit, personal loans), but not secured debt (mortgage, car loans).  Once you have fulfilled your obligations (monthly payments), you are debt free and out of the consumer proposal. That being said, like a bankruptcy, a consumer proposal can impact your ability to secure credit in the future.

Both of these options are valuable if you find yourself struggling with debt. Each option has its pros and cons, and so speaking with a professional debt consultant is the best place to start.

For more information about debt relief and bankruptcy versus a consumer proposal please contact DebtCare Canada at 1-888-890-0888 or visit www.debtcare.ca

Tuesday, 1 October 2013

School for Debt Relief #1: Harassing Collection Calls? Know Your Rights


With September behind us, and the school year in full swing, it is the perfect opportunity to take some time for yourself. So, what better time to give yourself a new start than right now? If you are in debt, this school for debt relief blog is for you. This first blog in the series will look at collection calls and help you better understand how to stop them. 

When you are receiving harassing phone calls from a collection agency it can be very stressful. Each time you pick up the phone can bring with it the anxiety that comes from knowing that you still have not managed to make that payment. But what can you do? If the money is not readily available, not answering or avoiding the calls is probably the best course of action, right? Wrong! This will likely only make the problem worse. 

Here are some things you need to know about your rights when it comes to collection calls. Firstly, when an organization calls you concerning a debt, they are likely calling from a collection agency – an organization hired by your creditors to collect a debt. These calls can sometimes get quite aggressive, so it is crucial to know your rights and better understand what is fair and what is not.

In Ontario there are laws which outline the appropriate behaviour that collection agencies must adhere to when making collection calls. First off, you must receive a notice in writing regarding the debt.

When can they contact you? Here are some of the restrictions put in place by law:

A collection agency cannot:

-        Contact you more than 3 times in the course of 7 days without your consent

-        Contact you on Sunday, except between 1 and 5pm

-        Contact you on any day between 9pm and 7am

-        Contact you on a statutory holiday

-        Use threatening, profane, intimidating or coercive language

-        Use excessive, undue or unreasonable pressure

-        Contact a spouse, family member, friend, etc. regarding the debt unless that person has guaranteed the debt or you have given permission for that person to be contacted.
If you feel as though your rights have been violated you do have some recourse for action. Sending a letter to the agency stating why you feel they have acted inappropriately, or, if the behaviour persists, filing a complaint with the Ministry of Consumer Services are two options to consider.

In the end, the only real way to stop collection calls is to pay your debt. If this is something that you feel you may not be able to achieve on your own it might be time to seek out some professional help. A debt solutions company can present you with the various options and help you get debt relief and stop those calls.

For more information about debt relief or to put a stop to the collection calls please contact DebtCare today by calling 1-888-890-0888.

Monday, 23 September 2013

Personal Financial Improvement: How to Rebuild Credit in 3 Simple Steps


Getting into debt is often very easy, and when that debt gets out of control it can be much harder to get out. The consequences of debt, especially when those debt responsibilities are not being met, can be devastating. Getting financing for a car, obtaining mortgage financing, or even being approved for a small loan for incidentals can be extremely difficult, and so getting out of debt is critical if you want to have a secure financial future. And, not only do you need to know how to get out of debt, you will then need to know how to rebuild credit. 

How can debt impact your credit? Missed or late payments, too much credit, too many credit checks and credit going to collections all work towards bringing your credit score down. Your credit report also reflects any credit activity and so any lending institutions can easily gauge credit behaviour based on this reporting. Many debt solutions, such as consumer proposals or bankruptcies can also harm your credit, but if it has gotten to the point that these debt solutions are where you turn for help, they can actually be the first step in how to rebuild credit.

How to rebuild credit: Step 1. Recognize that you may have a financial problem. If you are at the point where you are living paycheque to paycheque and have accumulated so much debt that you are only making minimum monthly payments - even if you make those payments on time - you have a financial problem. Making minimum payments on credit cards barely covers interest and so the debt will never be paid off. If you can’t manage minimum monthly payments, you have a financial problem. If you rely on your credit or payday loans to make ends meet - even if you are honouring your repayment terms - you have a financial problem.

How to rebuild credit: Step 2. As noted, the best way to start rebuilding your credit is to get rid of your debt. A professional debt management company is the smartest way to do this as they will be able to offer you the guidance and help that you need to get those debts paid off. Debt consolidation, a consumer proposal, bankruptcy or a debt settlement might be the answer – it all depends on your current financial situation.

How to rebuild credit: Step 3. Once you have paid off/settled all of your debts, you need to attempt to establish your credit once more in order to repair it. A great way to do this is with a secured credit card. With a secured credit card, you offer a cash collateral and the lending institution will take that money and it becomes your credit limit. You then use the credit card as you would any other – and make sure to make regular payments, never just the minimum. Also, stay away from payday/cash advance loans. These do not report to your credit report and can start a vicious borrowing cycle that can be hard to get out of.

Rome wasn’t built in a day, and rebuilding your credit won’t be either. It takes time, but knowing where to start is the first step.

For more information about how to rebuild credit, or to find out about possible debt solutions, please contact DebtCare Canada today by calling 1-800-890-0888.

Monday, 16 September 2013

Mortgage Refinancing: A Viable Debt Solution?


Debt in Canada has become a major problem for many individuals. The ease with which credit is granted by many credit companies sometimes makes it tough to avoid temptation, but the aftereffects can be distressing, especially if it gets to the point that it is hard to keep up with or make payments. There are many debt solutions out there, one of the most popular being mortgage refinancing.  

What is mortgage refinancing? When you refinance your mortgage to consolidate debt you are essentially using your home equity to pay off debt. Many people choose to refinance their mortgages to pay off debt because mortgage financing offers flexibility and often you can get a far lower interest rate as well as the convenience of a much more manageable single monthly payment.

Over the past year there have been many changes to Canadian Mortgage and Housing Corporation (CMHC) rules, many of which make it tougher for homeowners to consolidate using mortgage refinancing. Previously CMHC would refinance as much as 95% of an individual’s home, and would offer lines of credit to do so. However, they no longer issue lines of credit to consolidate, and the amount has been lowered to 80%.

The banks have backed these changes. As a general rule, banks will only grant refinancing if your new mortgage will not exceed 75% of your home’s current value (some approve at an even lower percentage). That means that if your new mortgage plus your unsecured debt is more than 75% of the value of your home, approval is not likely.

CMHC insured mortgages are one of many mortgage options for refinancing your mortgage to pay off and consolidate debt. There are so many different types of companies outside of the banks who will compete for your business: credit unions, finance companies, trust companies, mortgage investment firms and even private individuals.

What if your credit isn’t great? If you have less than stellar credit it might be harder to obtain mortgage refinancing for debt consolidation through a bank. Banks and finance companies like to see that those they invest in are not a high risk, and if your credit is bad you may be too risky. With that said, if you have good equity many other lenders may be willing to extend financing to you. If you seek mortgage refinancing as a debt solution but are unable to find approval, an alternative solution might be a better option. Non-mortgage refinancing debt consolidation, a consumer proposal or bankruptcy might be better suited to your situation.

If you are thinking about mortgage refinancing as a possible debt solution, it is best to speak with an experienced debt consultant first, one who will assess you and present you with all of the financial options available to you, the pros and cons, and guide you to the best financial plan.   

For more information about mortgage refinancing please contact DebtCare Canada today by calling 1-800-890-0888.

Tuesday, 10 September 2013

Debt Management – You Don’t Have to Do it Alone


When you are in debt, the personal issues that all too often accompany it can be overwhelming, and sometimes the task of ridding yourself of this financial burden can feel insurmountable. Knowing where to turn for advice or assistance can be tough, and so many people instead try to do it on their own. Debt can be crippling, but getting out of debt doesn’t have to be hard when you have the right people behind you, those that can offer debt management plans that can relieve your financial stress.  

There are several different types of debt management solutions available, and choosing the one that best suits your financial situation takes knowledge and a careful consideration of the options which exist. The most effective way to set in motion the best debt management program is to speak with a professional debt consultant.

What types of debt management programs can a professional organization offer?

Debt consolidation: Often debt becomes so problematic because monthly payments can take up the majority of your disposable income. This becomes even more challenging when those monthly payments are mostly interest, meaning that you are making very little principle payments overall. With a debt consolidation these payments are all combined into one manageable monthly payment, often with far lower interest. That being said, debt consolidations are often options only for those with credit in somewhat good standing.

Consumer proposal: Once your monthly payments become so large that you are often unable to meet them all, collection agencies may begin calling. A consumer proposal is a smart debt management program that allows you some relief from your debt obligations by lowering the amount you are required to pay back. Done in negotiation with a bankruptcy trustee, a consumer proposal leaves you with one monthly payment, freezes interest accumulating on debt and also stops collection action being taken against you. Consumer proposals are administered by bankruptcy trustees. It is important to note that trustees do not represent the bankrupt; they act to make a fair financial arrangement between you and your creditors. Never visit a trustee without your own representation. You want to work with someone with expertise in consumer proposals and bankruptcies to get a plan together and you should be able to count on your representative to negotiate with the trustee on your behalf.

Bankruptcy: If you have found that your monthly debt repayments far surpass your monthly income, and that you can’t keep up, bankruptcy might be the best option for you. Like a consumer proposal a bankruptcy must be conducted with a bankruptcy trustee, but it can leave you with relief from collection calls or wage garnishments. A bankruptcy can decrease your credit score, but if you are considering this option you have likely already damaged it.

Credit counselling: Credit counselling organizations are not-for-profit organizations where you make a single monthly payment to them which they distribute to your creditors. Credit counselling repayment terms can be long and grueling and credit counselling programs can result in significant damage to your credit.

Getting out of debt can be tricky, but you don’t have to do it alone. Ease the stress by choosing a debt management program in consultation with a professional debt consultant.

For more information about how a debt management program might be the solution to your financial problems, please contact DebtCare Canada today by calling 1-800-890-0888.

Tuesday, 3 September 2013

Back-to-School Shopping – Don’t Break the Bank


With the end of the summer and the beginning of September comes the inevitable back-to-school shopping. Whether for new clothes, shoes, backpacks, or school supplies, the total bill for back-to-school shopping can often run in the hundreds – especially if you have more than one youngster heading back to the classroom. Once they get older and those clothes they want become big ticket items, the bills get even heftier. Here we offer some smart back-to-school shopping tips that will help keep you from breaking the bank. 

Tip #1: Make a list. Get the kids to help. Set a budget and stick to it. Clothes can get expensive, even with the sales, so separate wants from needs.

Tip #2: Do inventory. Many of the things you need are likely already in the house. Go through and see what can be reused. Backpacks and pencil cases can be repurposed with fun fabrics, old patches, fabric paints, etc. Pencils are the same no matter how old they are. And always hold off on other purchases until you get a list from the teacher of what will be needed.

Tip #3: Talk to other parents. Word of mouth counts for a lot as far as finding deals – you might be surprised about what sales are out there that you were not aware of. They may also be able to provide other money saving tips.

Tip #4: Buy the basics in bulk and make lunches. Packing brown bag lunches can save a lot of money, and buying your lunch snacks in bulk can make it even cheaper. Avoid added costs such as drinking boxes by spending a few dollars upfront for a fun reusable water bottle – healthier and cheaper.

But what if your back-to-school budget is a lot less forgiving than these tips compensate for? If you are drowning in debt, back-to-school shopping can come with a great deal more stress than just having to brave the crowds. The beginning of the school term often signals a fresh start for kids, so why not take this chance to make a fresh financial start for yourself. Getting out of debt is a good idea at any time of the year – but any motivation that spurs you into action is a good thing.

A smart option for reducing your debt, especially if you have tried on your own with little success, is to turn to the professionals for help. A professional debt consultant can not only help you better understand the various debt solutions out there and which one would best suit you, he or she can also help you develop a smart budget that is realistic. You don’t have to do it alone. Let the teachers at ‘debt school’ help you take control of your debt.

For more information about getting out of debt this September, please call DebtCare Canada by calling 1-800-890-0888 or visit us online at www.debtcare.ca.

Tuesday, 27 August 2013

Getting Out of Debt Blog Series #4: Debt Settlement


With the average consumer debt load in Canada at an all-time high, it is unfortunately not surprising to see companies popping up everywhere offering solutions to your debt problems through a debt settlement. But be wary; unlike consumer proposals, bankruptcies and debt consolidations, debt settlements, depending on the company, can sometimes come with more negatives than positives. This 4th blog in our ‘getting out of debt blog series’ looks at the debt settlement, giving you the information you need to help you make the right decision about solutions to your debt problems.

What is a debt settlement? A debt settlement is just that – the settlement of your debts. This settlement involves a negotiation with your creditors to reduce the amount of the debt you are required to pay off.

A debt settlement will in almost all cases involve paying the settlement amount in a single instance. In most cases the collection agency representing your creditor can accept less money from you than you owe to settle your debt. We have seen collection agencies settle debt for as little as 50% of the amount that was owed. That being said, regardless of whether it is the collection agency or a creditor that is willing to consider a debt settlement, they will want to receive the settlement money in full.

Often consumers won’t have the money to pay the settlement in full. This has spawned an entire industry of debt reduction companies. These companies will accept monthly installments from you over time with the promise that once you have remitted enough money they will settle your debts. This is a risky proposition. Instead, do your due diligence because if you are remitting to a debt reduction company and they go out of business in the future your money may not be secured.

There are several reputable companies out there that offer financial consulting and can help you to settle debt with your creditors without risk to you. These companies, experienced with consumer debt solutions, will represent you fairly and help you establish a plan to settle your debts without you giving money to them on a monthly basis.

Avoid being taken advantage of by doing research and avoiding companies who bill themselves as debt reduction specialists or companies. Look for positive reviews from consumers and see how much of an online image they have established to ensure that you are working with a professional organization that has staying power.

How will a debt settlement affect your credit? As with any debt solution, a debt settlement is recorded on your credit report and may bring down your score. That being said, if you are considering debt settlement the impact on your credit rating is likely no worse than the damage already done. Once you have settled your past bad debt you can begin the process of rebuilding.

If you are considering a debt settlement as a way of getting rid of your debt, there are a number of things to consider, but the most important is the company itself. Just because a company promises to settle your debts it doesn’t mean that they will do so the right way. Make sure that you do your research and make inquiries. Working with a trustworthy debt settlement company will make all the difference, keeping you protected throughout the process.

If you need help getting out of debt or would like to find out more about your debt settlement options, please contact DebtCare Canada today by calling 1-800-890-0888.

Tuesday, 20 August 2013

Getting Out of Debt Blog Series #3: Debt Consolidation

When debt is taking over your life it can be difficult to see the light at the end of the tunnel. Mounting monthly payments that include mostly interest can become difficult to meet and missed payments can lead to collection calls or other enforcement action. You are not alone – many Canadians are dealing with heavy debt loads and don’t know where to turn. This 3rd blog in our ‘getting out of debt blog series’ talks about debt consolidation and provides you with the information necessary to help you determine whether this is the best route to take for getting out of debt.

What is debt consolidation? It is pretty straightforward – a consolidation of your debt into one monthly payment, saving you thousands of dollars in interest and making the monthly payment far more manageable. It is a loan given by a financial institution which allows you to pay off all of your unsecured debts to creditors at once (secured debts such as car loans or mortgages are typically never included).

A debt consolidation can be achieved through a secured or unsecured loan or line of credit. Secured consolidation loans often involve a house, vehicle, investment or guarantor as security.

Obviously if you obtain a debt consolidation, your credit is paid off and the result will be no further collection or enforcement action by your creditors. Debt consolidations will also in some cases lower your interest rates and monthly payment. If you have damaged your credit, or are having enforcement action taken against you by your creditors and have no assets to pledge as security – being approved for a debt consolidation can be challenging.

Debt consolidation is not for everyone. Often in order to qualify your credit needs to be acceptable since the institution lending the money will want some indication that you will be able to make the required monthly payments. If your credit rating is less than stellar it might be more prudent to consider some other alternatives. The more bruised your credit is, if approved, the higher the interest rate on the debt consolidation will be, which may leave you in no better shape than when you started.

A smart way to determine how best to approach your ‘getting out of debt’ solution is to speak with a professional debt consultant, one experienced with helping Canadians find effective forms of debt relief. A consultant will be able to go through all of your financial obligations to help determine what means for getting out of debt are best suited to your unique situation. He or she will also be able to get the ball rolling and get you started on a debt-free road as well as help you to budget realistically for the future.

If you are in debt that you feel is becoming tough to manage it is probably time to consider getting some help. Don’t wait until the debt takes complete control.

For more information about debt consolidation or getting out of debt please contact DebtCare Canada by calling 1-800-890-0888 or visiting us online at www.debtcare.ca.


Monday, 12 August 2013

Getting Out of Debt Blog Series #2: Bankruptcy


There are thousands of Canadians facing a mountain of debt that can seem impossible to overcome. For many individuals, it can often seem as though there is nowhere to turn as far as getting out of debt – but there is hope. It never helps to ignore the problem or let the stress of high debt levels control your life. The second blog in our back-to-basics ‘getting out of debt blog series’ looks at bankruptcy, and can help you better understand if this might be the best solution for your financial woes.  

What is bankruptcy?

Bankruptcy in Canada is a legal process and is governed by federal law under the Bankruptcy and Insolvency Act. Like a consumer proposal, a bankruptcy must be conducted by a licensed trustee in bankruptcy – you cannot negotiate one on your own. The role of a trustee is to ensure that both you and your creditors are protected, so they will negotiate the terms of your bankruptcy and administer it accordingly.

When you file for bankruptcy all of your assets, which include investments, property and your income, become the property of your trustee while you are “undischarged.” This means that if you have equity in your assets, or your income exceeds what is the allowable minimum, you will be subject to surplus income. Surplus income means that 50% of any income you earn over the prescribed minimum and 50% of any equity in assets will have to be paid to your estate to be distributed to your creditors by your trustee. During the undischarged period you will have reporting obligations to your trustee which includes reporting your income.

In Canada, and in the case of a first time bankruptcy – if there is no surplus income you will only remain undischarged for 9 months (if you meet any additional terms in your bankruptcy); if you have surplus income you will remain undischarged for at least 21 months. If, at the end of 21 months, you have not re-paid your surplus income into your estate you will remain undischarged until you do.

While bankrupt, additional terms in your bankruptcy will include not only disclosing income but also reporting on living arrangements, family situation, etc. You will also be required to attend credit counselling sessions and report any monies borrowed (over $500). 

To qualify for bankruptcy in Canada you must meet certain conditions, the foremost of which is that you must be insolvent. To be insolvent means that you owe at least $1000 and that you are unable to pay the debts as they are due.

Will filing for bankruptcy affect your credit? Yes, since your credit report is the document which contains all of your borrowing activity and credit behaviour. When you file for bankruptcy your credit score will change from being a number to being an “R” reject score until you rebuild your credit. The bankruptcy will show on your credit report for 6 years following discharge. That being said, if you are seriously considering filing for bankruptcy your credit has most likely already suffered, and so cleaning it up will take time.

Also, you can often qualify for credit within 2 years of being discharged from bankruptcy with up to 2 years of solid re-established credit.

Contrary to popular belief you can file for bankruptcy and keep your home and vehicle. Because the trustee represents you and your creditor it is important to have your own representation through the bankruptcy process. Bankruptcy can be complicated and having an expert in your corner will ensure that you are prepared for all eventual outcomes and don’t go to the trustee without already having your plan in place.

For more information about getting out of debt or to find out if you qualify to file for bankruptcy in Canada, please contact DebtCare Canada at 1-800-890-0888.