It seems to happen every year. Another financial survey reveals that managing debt is one of the top resolutions or concerns for Canadians as they head into a new year. Yet, as winter turns into spring and spring turns into summer, families across the country continue to struggle, unable to make a dent in their household debt balances. We know from our 2018 Affordability Index Report that three-quarters of Canadians have personal debt. Even more alarming is that one-quarter of Canadians are actually overwhelmed by their heavy debt loads.
It is a worrisome reality: personal debt is affecting the average Canadian’s ability to afford basic needs and prepare for major life milestones like buying a home, having kids and saving for retirement.
Are you ready to do something about your debt?
The first step is to get help. Here are a few things you need to know before making an appointment with a debt professional:
Before you can solve any problem, it helps to do your research. The same is true when you are looking for a debt professional to help you resolve debt problems.
A Licensed Insolvency Trustee — or LIT — is the only debt professional authorized and licensed by the federal government to file a consumer proposal or bankruptcy on your behalf. You don’t need to have insurmountable debt in order to speak with an LIT. Here are a few facts you should know:
If you’re having trouble budgeting or managing your credit, a not-for-profit credit counsellor can provide one-on-one counselling. A credit counsellor can also set up a Debt Management Plan (DMP) for you, which is also referred to as an informal proposal.
A DMP differs significantly from a consumer proposal. For example, with a consumer proposal, your interest charges are frozen and you will usually repay only a portion of what you owe your creditors. With a DMP, you’ll usually repay 100% of what you owe. Although a credit counsellor can negotiate with your creditors to decrease interest rates or extend your repayment period.
Learn more about the differences between a consumer proposal and DMP here.
If you are thinking of speaking to a credit counsellor to help with debt management, ensure that you follow these guidelines issued by the Financial Consumer Agency of Canada.
A bank or credit union can offer you a consolidation loan which will combine all your unsecured debts into a monthly payment. A few things to consider if you are thinking of using this debt relief option:
For a more detailed look at how a debt consolidation loan works, check out this example from the Financial Consumer Agency of Canada.
It is not always easy to take that first step. If you’re not quite sure you need debt help, start by asking yourself the following questions:
If you answered “yes” to any of these debt warning signs, it is a good idea to speak with a Licensed Insolvency Trustee about viable debt solutions. If you’re able to deal with your debt load before it becomes unmanageable or overwhelming, you will have more options available to repay your debt and get your finances back on track.