Debt Solutions For Your Specific Situation
Dealing with overwhelming debt is frustrating and stressful, that’s why it’s important to be educated about the pros and cons of different debt solutions so you can make an informed decision.
If you need help finding the option that will help you reduce your debt payments and get out of debt as quickly as possible, contact an advisor today.
Top Debt Solutions: Explore Your Options
1.) Pay It On Your Own
If your debt is manageable, you can start by making a monthly budget. Find ways to cut back your spending and increase your income then put the extra money toward repaying your debt. Pay off credit cards with the highest interest rates first.
This option takes time and persistence. It works if you can generate extra cash flow, but it doesn’t work if your debt is so high you cannot make all your payments, even with budget improvements.Learn more about budgeting
2.) Debt Consolidation
If you can borrow money at lower interest rates, you can use it to pay off your high-interest debts. A debt consolidation loan can combine all your debts into one lower cost option, and the monthly payment might be lower than your combined payments due to the lower interest rate. Because you’re paying less interest overall, you’ll be able to pay off your debt quicker.Learn more about debt consolidation
3.) Credit Counselling
If you think you can repay your debt on your own, but just need more time, credit counselling can help. Your credit counsellor might recommend a debt management plan, where you work together to pay your debt in full over a period of time (up to five years). In this situation, your creditors might lower or eliminate your interest charges so you can pay your debt faster.Learn more about credit counselling
4.) Debt Settlement
This option allows you to negotiate with your creditors to settle your debt for less than you owe. There are two types of debt settlement in Canada: informal, and formal. Formal debt settlement is called consumer proposal.
In the informal version, a debt settlement company typically advises you to stop paying your bills and make payments to them, which go into a debt settlement fund. After a period of time if this fund has grown large enough, the company uses it to try to negotiate lump-sum settlements with your creditors.Learn more about debt settlement
5.) Consumer Proposal
This option is the number one debt relief alternative to bankruptcy in Canada. It’s a formal, legally binding arrangement you make with your creditors to reduce your debts to less than you owe.
Unlike an informal debt settlement, an accepted consumer proposal is legally binding on all unsecured creditors. You also don’t make any payments until your proposal has been filed with the government. Your payment plan is based on your ability to pay, and in many cases, creditors agree to take less than the full amount you owe.Learn more about consumer proposal
This option is a last resort. If you don’t have sufficient resources to make even partial payments or you can’t reach an agreement with your creditors, your final option is personal bankruptcy.
In this option, a trustee is appointed to administer your affairs. You make payments based on your income for a period of up to 21 months, and you may lose some of your assets. At the end of this period, your unsecured debts are resolved in full.Learn more about bankruptcy
Talk to An Advisor
For help exploring debt solutions and finding the one that fits your situation, contact an advisor.