How to Get Credit Card Debt Relief in Canada

How to Get Credit Card Debt Relief in Canada

Aug 18

The overall consumer debt in Canada has risen in the past decade. The 2008 financial crisis exacerbated this effect to a great extent. A large number of Canadians right now are steeped in debt because of student loans, mortgages, car loans, and other types of personal loans.

hand-shadeGetting into debt is easy. Getting out? Not so much. However, if you are truly motivated to get out of debt completely, there are numerous debt relief strategies that you can try in Canada. Here is a list of the most practical debt relief tactics with the best chances of getting complete debt relief in Canada:

Government Debt Relief Programs

These are the most reliable, safe, and affordable to get debt relief in Canada. If you have incurred debt under “honest but unfortunate” circumstances, you can apply for a consumer proposal with the government. Consumer proposals are applicable only to unsecured debts, like those incurred because of payday loans, credit cards, CRA taxes, and personal loans. Secured debts are currently not covered by consumer proposals. Some unsecured debts, such as court fines and child support, are also not covered by consumer proposals.

Simply put, a consumer proposal is a legally-binding agreement between the debtor and the creditor. These agreements list new terms for paying down a past debt. Normally, the debtor agrees to pay back a portion of the debt within 5 years. The proposal only becomes binding if all the creditors involved vote yes to approve. Consumer proposals are governed by the Bankruptcy and Insolvency Act, so both parties have their rights addressed.

The debt payments will be made through a trustee. If you qualify for a consumer proposal, you will also receive free debt counseling and financial planning advice from a professional.

Settle the Debt Directly with the Creditor

Traditionally in Canada, debts were settled by directly negotiating with the creditor involved. If you default on a loan, it’s bad for both you and the creditor. You ruin your credit history, and the creditor gets nothing and has to write off a huge loss. Settling the debt out of court is less expensive for both parties as well. So, if you find yourself unable to repay a particular loan, instead of avoiding your creditors, talk to them. Explain your situation clearly and honestly. Negotiate with your creditor for a new set of terms to repay the loan. The creditor might write off a portion of the debt, extend a grace period or the repayment time frame, and could possibly reduce the monthly interest rate as well.

Seek Help from a Debt Relief Agency

There are private companies that help people get out of debt as well: https://www.lifeoncredit.ca/getting-out-of-debt-get-a-chance-with-debt-consolidation-loans/ However, this industry is rife with scammers. So, only seek a reputable debt relief agency and only if you are unable to negotiate with the creditor directly. A debt relief agent can assess your finances and negotiate a settlement with the creditor. This service is not for free. You will have to pay service charges. Make sure you understand how much the agency charges before you agree to their help.

The last resort for debt relief is bankruptcy. Do not apply for bankruptcy before trying at least one of the above mentioned tactics. Bankruptcy can make you ineligible for certain loans. Therefore, think carefully before applying. It’s best to seek professional debt counselling before you make any final decision regarding your debt.

Borrowing to Cover Legal Costs

Borrowing to Cover Legal Costs

Apr 07

Whether you are going through divorce or complex litigation case, legal costs add up to the point where many are forced to look into different borrowing solutions. There are various options to consider, from traditional banks and unions to specialist lenders. The choice of lender depends on the fees involved, your income and credit score, and whether you need urgent cash to pay expenses.

Traditional Lenders

A bank loan with a short term is one way to cover legal costs. Legal aid is not offered to meet the cost of dissolution or divorce but you can apply for a personal unsecured loan (https://www.lifeoncredit.ca/bad-credit-personal-loans-in-canada/) to cover court, solicitor, and other fees. This will add to the legal costs, and many consumers end up paying thousands of dollars. To this, it is important to shop around and find a low-cost loan with no prepayment penalties.

If you are a union member, you may visit your credit union and inquire about different options you have. Similar to banks, your credit score is one of the most important factors to measure risk.

Third Party Funding Services

There are funding services that offer loans to borrowers involved in commercial disputes, personal injury cases, structured settlement, workers’ compensation, and civil rights cases. Some borrowers resort to title loan companies and payday lenders but they charge higher interest rates. In some cases, the rate, term, and repayment schedule are heavily weighted, and this is a warning sign. On the good side, lenders promise quick approval and only require that borrowers have an active checking account and present a photo ID or driver’s license and proof of employment. If you need cash over a short period, this is a good starting point because traditional lenders request more documents and information and take more time to process your application. Find list of lenders here.

Peer to Peer Lending Services

Peer to peer loans are another option to cover expenses, and lending services often advertise lower fees than unions and banks. They also claim that they are able to offer competitive rates and terms because they are not standard operators. Unlike banks, they don’t pay salaries, utilities, and other expenses. Some peer to peer lenders require a cosigner or collateral to guarantee prompt repayment while others offer unsecured loans. Keep in mind that not everyone gets approved. Lending services also use scoring systems to assess creditworthiness and risk. Some will be willing to offer a loan to a borrower with a score of about 660 but many require a higher rating. Check lenders here: https://www.lifeoncredit.ca/

Credit Card Companies and Introductory Rates

Using a low-interest credit card (https://www.lifeoncredit.ca/find-a-low-interest-balance-transfer-credit-card/) allows borrowers to cut down on interest payments. Better yet, you may want to use a card with an introductory zero rate to meet legal expenses. The introductory offer is usually valid over a period of 6, 12, or 18 months. Avoid department store and specialty cards with heavy interest rates unless you have exhausted all other options you have.

Other Options

One option is to cover legal expenses once a financial settlement has been reached. Some law firms offer this option. You may also think of valuables to sell or stuff you no longer need. You may also ask your friends or family for a short-term low-cost loan to cover the expenses.