Personal finances can be tricky to manage. For many Albertans, maintaining a monthly cash-flow is a balancing act that can fall to pieces with an unexpected expense in the $200 range. So many of us have experienced it at some point, and the rest of us know someone who has. One missed bill payment can throw everything off track and launch us into a world of continual debt. In this world, we are often required to choose which debts we will pay and which ones we will allow to default. It is a scary place with substantial interest charges, constant collection calls, and sometimes lost wages. If you are struggling to manage multiple debts, if you are stuck paying high-interest rates, or if you cannot afford to repay your current obligations, take hope! There are debt consolidation options available.<\/p>\n
Debt consolidation has been practiced by Canadians for many years as a strategic way to manage financial obligations, reduce costs, and pay off debt. On this page, we will explore different types of debt consolidation, looking at the pros and cons of each, and applying them to appropriate financial situations. If you are currently considering debt consolidation options for yourself, we invite you to reach out via phone, email or live chat. We will be happy to answer any questions related to your unique circumstances or set up a free consultation meeting with one of our Licensed Insolvency Trustees<\/a>.<\/p>\n Debt consolidation started as a form of refinancing but has grown to include multiple solutions including private programs and federally regulated solutions to bring together all of your unsecured debts into a single monthly payment. There are three main methods used to consolidate debt in Canada. Consumer proposals<\/a> are regulated by the federal government<\/a> and administered by Licensed Insolvency Trustees. With a consumer proposal, your debts can be combined and reduced by up to 70%. Another method is a debt management plan (DMP). These programs are administered by credit counselling agencies and allow you to repay your debts over time, with little or no interest. The final method is a traditional debt consolidation loan offered by a bank or credit union.<\/p>\n No matter which method you choose, there are two main reasons to consolidate debt. The first is to simplify your life with one single payment each month. The second is to reduce the overall cost of managing multiple debts with unfavourable terms. All three methods will accomplish these goals, so knowing which one to choose depends on you understanding your situation and going for the option that makes the most sense in your case.<\/p>\n A consumer proposal is an agreement<\/a> between you and your creditors that requires you to pay back only a portion of what was initially owed instead of the full amount. In many cases, your debts can be reduced by up to 70%. The remaining amount can be paid off over time up to a maximum period of five years. If you fulfill your obligations, the majority of the debt will be forgiven. A consumer proposal can consolidate most unsecured debts, including income tax and student loan debt (if your studies ended more than seven years ago). For a proposal to be accepted it must be approved by creditors representing at least 50% of the overall debt. Once it is accepted the rest of the creditors will also be bound.<\/p>\n Consumer proposals are the only formal debt settlement<\/a> solutions, other than declaring bankruptcy<\/a>, regulated by the federal government<\/a>. As such, they can only be administered by a Licensed Insolvency Trustee. Many of the benefits of a consumer proposal are unique to this method of consolidation, which has made it the preferred insolvency solution in Canada.<\/p>\n If you have more debt than you can repay and you are considering debt consolidation options, a consumer proposal may be the best solution. If this is something you are considering, then we invite you to take the next step and meet with us face-to-face for a free consultation<\/a>. One of our experienced trustees<\/a> will review your situation and explain all of the options that are available in your specific case. Ultimately, you are the one who will decide which option makes the most sense. You can trust that our team will give you everything you need to make an informed decision.<\/p>\n <\/p>\n Debt management plans are financial programs administered by credit counselling agencies. There are many different companies and organizations offering credit counselling services including many not-for-profit groups. These plans are typically designed for people who are experiencing hardship but are still able to pay back the full amount of their debts. Debt Management Plans may also be ideal for those who are unable to qualify for a consolidation loan. In addition to helping you get out of debt, they focus on support and counselling to teach healthy spending habits and money management skills.<\/p>\n With a debt management plan, you will work with a counsellor who will attempt negotiations with your creditors on your behalf. They will offer your creditors the option to accept a repayment plan that includes the full amount owed to them spread out over an extended period of time. In some cases, they are able to reduce or eliminate interest.<\/p>\n A key difference between debt management plans and consumer proposals<\/a><\/strong> is that with a management plan, creditors can opt-out for any reason, and many do. If you are considering a DMP here are a few additional points to consider:<\/p>\n <\/p>\n Applying for a consolidation loan means that you are applying to refinance your debt. If you are approved, the bank or credit union will loan you the money to pay off existing debts with more favourable repayment terms than what the current creditors were offering. If your credit cards are continually maxed out or carry a high balance, this option would significantly reduce the amount of interest you will pay. Eliminating several monthly payments will make it easier to manage your finances each month and stay on top of your debt. For those who qualify, it can be a stepping stone that eventually leads away from debt.<\/p>\n One major issue with this option is the qualification procedure. To get a loan, you have to apply at a bank or financial institution<\/strong>. They will verify that you are currently employed and have a steady income. They may also require you to provide a monthly budget to ensure that you can afford the loan payments each month. If you do not qualify on your own, you may be able to offer up some collateral or have a co-signer guarantee the loan. Even if you do qualify, the interest rates may fluctuate based on your credit score. Here are some points to keep in consideration:<\/p>\n A final point of consideration is the lack of resources and counselling available. While this option does help simplify your debt situation, it does not provide resources to help you budget and manage future expenses. In fact, you often will still have access to credit and can quickly accumulate additional debts.<\/p>\n <\/p>\n We don\u2019t expect to be able to answer every question with a single article. We know that everyone\u2019s situation is different and that you will have questions pertaining to your unique circumstances. If you are evaluating your options, the next step is a free consultation meeting with one of our Licensed Insolvency Trustees<\/a>. We will look at your debt situation and make sure that you know what options are available to you, and how they would impact you financially. Our goal is to provide you with the information you need to make an informed decision. Get in touch with us today if:<\/p>\n Debt Consolidation & Consumer Proposals Debt Consolidation Options Personal finances can be tricky to manage. For many Albertans, maintaining a monthly cash-flow is a balancing act that can fall to pieces with an unexpected expense in the $200 range. So many of us have experienced it at some point, and the rest of us know […]<\/p>\n","protected":false},"author":1,"featured_media":810,"parent":364,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"yoast_head":"\nThe Basics of Debt Consolidation<\/h2>\n
The Purpose of Debt Consolidation<\/h2>\n
Consolidating Debt with a Consumer Proposal<\/a><\/h2>\n
What Debts Can Be Consolidated with a Consumer Proposal?<\/h3>\n
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What Debts Cannot be Consolidated with a Consumer Proposal?<\/h3>\n
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The Benefits:<\/h3>\n
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Is a Consumer Proposal<\/a> the Right Choice?<\/h3>\n
Consolidating Debt with a Debt Management Plan<\/h2>\n
What debts can be consolidated with a debt management plan?<\/h3>\n
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What debts cannot be consolidated with a debt management plan?<\/h3>\n
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The Benefits:<\/h3>\n
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Consolidating Debt with a Consolidation Loan<\/h2>\n
The Benefits:<\/h3>\n
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The Next Step<\/h3>\n
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