Top 5 Debt Relief Solutions: Which One is Right for You?
There are several Debt relief solutions you can turn to if your debts are getting too high for you to control. If debt is becoming an overwhelming problem for you, there are a few things you can do to curb the damage caused by mounting debt. Read on to find out more about the top debt relief solutions you can choose from.
When is Your Debt Too Much?
When you find yourself facing the following issues, it’s time to consider a debt relief solution to help regain control of your finances:
- You can no longer make all of your minimum monthly payments
- Your Credit score is suffering
- Your debt total is increasing instead of decreasing
- The bulk of your payments go to covering interest
- You are being refused for important loans you need
Government Debt Relief Program
If you owe the government money, the only way to relieve that debt is through a consumer proposal. In order to do this, you need to work with a licensed Insolvency Trustee, as they are the only professionals eligible for filing this kind of documentation. This is a legal debt settlement option that can help prevent you from filing for bankruptcy – which is always a last resort.
This may be your only solution when it comes to a backlog of government funds. This can help you minimize the debt you owe, make a repayment plan you can follow, and protect both you and the government from your personal bankruptcy.
Debt Relief Solutions
If your debt problems are becoming too much for you to handle, it may be time to consider a debt relief solution. Each of the following solutions are intended to help you regain control of your finances, improve your credit score, and provide you with the best long-term outcome possible given your unique individual situation. Here are some of the debt solutions you can turn to and how they work.
1. Debt Consolidation
Choosing debt consolidation is a good choice if you owe money to several different creditors and your minimums are now collectively too much for you to repay. Meeting with the financial experts at BH Financial can help. We can help you pay off your loans and consolidate all of your debts into one single loan. This way, you will only have one payment to make. This is a particularly good option for you if you have a lot of credit card debt. Not only is the interest rate high on credit cards, but there are tons of excess fees added to your debt if you surpass your credit limit.
Carrying credit card debt over from month to month, or using more than 80% of your credit card limit are both very damaging to your credit score. This can affect your ability to secure a mortgage at a traditional banking institution, or even prevent you from qualifying for a new job or promotion. Maintaining good credit is important. Debt consolidation can help minimize the effect on your credit score. In fact, as you pay back the loan, you will notice your credit rate starting to improve.
Debt consolidation will not eliminate your debt, but it can make it more manageable for you. A debt consolidation expert at BHM can help you spread out your payments and develop an individualized repayment plan that you can actually afford. The goal at BHM is to help you get your det paid off as efficiently as possible, help improve your credit, and set you on the path to financial freedom.
2. Debt Settlement
If you owe creditors a lot of money, you may attempt to ask them for a debt settlement arrangement. This could mean asking the utility company or collections agency to actually reduce the amount you owe. In many cases, collections agencies are unable to recoup their funds at all. Accepting partial payment may be more beneficial to them than either taking you to court or not receiving any payments at all.
It should be noted that this is not a standard repayment plan. The arrangement is usually made verbally and can vary by creditor. Also, a creditor can refuse your request for a debt settlement altogether and continue to pursue you for the total amount. Unless you get an Insolvency Trustee to create a consumer proposal on your behalf – which comes with a hefty price tag – you may not be able to secure a debt settlement plan that works for you.
You can always give this option a try and see which creditors may be most willing to work with you to help lower your overall debts. If this debt relief option doesn’t work for you, you can also contact a financial expert at BHM for a consultation to understand more about your debt relief solution options and choose the one that is best for you.
3. Credit Counselling
You may obtain credit counselling from a non-profit credit counsellor. They will create a Debt Management Plan (DMP) on your behalf and share it with your creditors. A DMP usually helps in getting your interest rates cut or reduced, but the debt will not be forgiven. It must still be paid and generally, a DMP includes payments that are spread out over 3 to 5 years. If your debt is significant, this may not work for you.
If your debt can be paid in the time period, you may be able to secure low enough interest rates with a DMP to make debt repayment manageable for you. If you meet with a BHM Financial expert, we can explain the ins and outs of this debt relief solution to you and help you understand whether or not it is the right solution for your individual needs.
4. Consumer Proposal
A consumer proposal is a legally binding contract drawn up by a Licensed Insolvency Trustee (LIT). This is an agreement that is sent to your creditors to inform them you can non longer make the payments. They will then have to reduce or forgive the debt. In most cases, an LIT can get your interest rate decreased and payments spread out over five years. If you expect to be earning more income, this may be the right solution for you.
However, if you are not able to pay the debt off in five years, this solution may not be ideal. It is also quite damaging to your credit score. It will remain on your financial record for seven years. Essentially, it is a message to your creditors that say you can’t afford to pay your debts. This is the last step before personal bankruptcy and it will have a huge impact on your credit score and your ability to secure loans from traditional banking institutions.
5. Personal Bankruptcy
Personal bankruptcy should be viewed as the final resort. When you find yourself completely unable to pay your debts in the foreseeable future, you may have to consider personal bankruptcy. This does have repercussions on your credit score and will take seven years to overcome. Personal bankruptcy will discharge you of all your debts once the process is completed.
Before making the decision to file for personal bankruptcy, you should find out more about what filing for bankruptcy is all about and how it can affect you in the long run. You should consider booking a consultation with one of your financial experts to discuss your options at length. Every situation is different and we may be able to help you find a better solution to your debt problems.
Dealing with Debt
Are you struggling with a growing debt problem? You’re not alone. Thousands of Canadians are dealing with debt and as the Covid-19 crisis persists, more and more people are finding themselves unable to make ends meet. If you’re struggling with debt, you may be looking for answers to a few common questions. Here are is everything you need to know about debt:
What Happens if I Never Pay My Debt?
If you have credit card debt and stop making payments, the credit card company will start by adding more fees to your debt. Then, they will freeze your card so you can no longer use it. Once this happens, you can bet you won’t be approved for any other credit cards. The same will go for utility companies. They will start by adding late fees and other charges to your account. If you continue to not pay, they will cut your services, even if they are deemed essential.
Once this happens, the creditors will likely send you to collections. Once the collections agency has your file, they will call you, your family and friends until they get in touch with you and collect their payment. If you still do not pay, they can take you to court. If the judgement is made in their favour, the government will automatically deduct from your paycheque through your employer to pay off the debt.
In some cases, the debt may be too small to take a consumer to court. However, they may continue to call you and ask for payment for decades. You can get away with not paying a collections agency if they don’t bring you to court as there is a statute of limitations on when they can take you to court, However, even after that time passes, the debt still exists and they may continue to call you for the rest of your life.
Will Credit Card Companies Forgive Debt?
You can always ask but it is unlikely a credit card company will forgive any of your debt. Your best bet in this case is to seek out a personal loan to consolidate your credit card debts and pay them off as quickly as possible.
What Happens to Debt After Seven Years?
Even if your debts are not paid off, the debt does fall off your credit report after seven years. This means your credit score can start rebuilding and improve. However, throughout the seven-year period, you credit score will drop dramatically. You will need to work hard to improve it if you want to live a financially successful life.
How Much Credit Card Debt is A Lot?
This is a question that many consumers ask but there isn’t really a magic number. Credit card debt is bad if you can’t afford to pay it, can’t pay the minimum monthly payment on your balance, carry your balances over from month to month, or are using more than 80% of your credit limit on a regular basis.
How Do I Decide Which Debt Solution is Best for Me?
Choosing the right debt solution for you is best done with the help of a financial consultant. The experts at BHM can help you understand your options and choose the one that works best for your needs. The best option is always to try and consolidate debt. This is the ideal way to pay off what you owe and make your debt much more manageable.
This will also have the least impact on your credit score. Your surmounting debt is damaging your credit score and most debt solutions will also greatly affect it. Consolidating your debts via a personal loan can help you regain control of your finances. Yes, it may affect your credit score temporarily, but in the long run, it’s very helpful to controlling your debt and rebuilding your credit score.
Meet with one of our BHM Financial experts today to discuss your unique situation and the options you have to repay your debt in the most efficient way possible. There are several different types of loans you can turn to to help consolidate your debts. Here are some of the options you have to choose from:
- Personal bad credit loan
- Car title loan
- Home equity loan
- Consolidation loans
- First and second mortgage loans
Steps to Managing Your Debt
As one of Canada’s leading lenders, BHM Financial has helped thousands of Canadians get out of debt. Our goal is simple; help consumers pay off debt and get on the right track to financial freedom. Here are some of our top tips to help you manage your debt and stay out of debt in the future:
- Make a financial plan: Budgeting all of your expenses can help you manage your debt and stay out of debt long term.
- Make your payments: It’s best not to miss any of your payments. If you find yourself, unable to do this, seek financial help right away.
- Do not stay in a cycle of credit card debt: Debt accrued on your credit card will make it very difficult for you to pay off. With soaring interest rates, your debt will grow quickly. It’s best to seek out debt consolidation if you have an unmanageable amount of credit card debt.
- Build an emergency fund: No matter how little you have to put away, it is highly recommended that you save a portion of every paycheque you receive and put it away for an emergency. Lack of funds for an emergency can land you in debt very quickly.
- Get financial counselling: Losing control of your debt can happen very quickly. Once your debt has become unmanageable for you, the amount can quickly grow. Eventually, this will damage your credit and become overwhelming. Meeting with a professional is the best way to ensure you understand all of your financial options and make the right choice for your situation.
Why Choose BHM Financial?
There are several advantages to choosing the experts at BHM Financial for all of your financial needs. Unlike many lenders, we do not operate with any third parties. We make the loans to our clients ourselves. This means we don’t need to wait for anyone else to approve your loan. We can offer instant approvals and we can cut out the middleman rates that are charged by other lending companies.
Our expert staff is knowledgeable and understand that your goal isn’t just to pay off a debt. It’s to stay debt-free. We know that hard times can hit anyone at any time. While a bank may not be as open to helping you, we will – even if you have bad credit. In fact, your credit score will never play a role in our decision.
When your bank refuses to give you a mortgage or a small business loan because of your poor credit or your debt problems, we will step in to help. Our staff can provide you with the financial knowledge you need to control your budget, pay off your debt, and start rebuilding your credit score.
You can also apply for a loan directly on our website. Our quick and easy approval process can get cash into your hands within a single day. If you need access to quick funds, we can help you get it. Call us today for more information or fill out an application right now. One of our consultants will get in touch with you to work out a repayment plan that works for you because we know you want to repay your debt and still be able to live a reasonable lifestyle at the same time.
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