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Compare Canadian debt relief options and providers. What each path costs, how it affects your credit, and who is licensed to file.
7 providers compared on what they do, what the first conversation costs, and whether they are licensed to file. Three of the four routes out of problem debt cost you nothing to explore, and only one of them is a loan.
A debt management plan reduces or freezes interest while you repay the full principal, usually over three to five years, and is arranged by a credit counselling agency. A consumer proposal reduces the principal itself and is a legal process that only a licensed insolvency trustee can file. The proposal has a heavier credit impact but settles the debt for less.
The first conversation is free with every provider listed here. A debt management plan usually carries a modest monthly administration fee, disclosed before you enrol. Anyone charging for an initial consultation is worth avoiding.
When you can qualify at a rate meaningfully below what you are paying now. On $15,000 of card debt at 22.99%, consolidating at 19.99% saves roughly $1,080 over four years. Consolidating near the 35% federal cap costs more than staying put, and a debt management plan will serve you better.
A consumer proposal and a bankruptcy both trigger an automatic stay that legally stops collection activity. A debt management plan does not, though most creditors stop once a plan is in place. A consolidation loan stops calls only because the original debts are paid off.
What is s a debt solution?
A debt solution is any method that helps you get out of debt. This can be a legally protected, structured process such as a consumer proposal, an informal agreement with creditors, a consolidation loan, or even something as simple as good financial practices and repairing your credit. Any practice, tool or agreement that helps you clear your debts can be considered a debt solution.
What is a normal amount of debt?
The average debt in Canada is around $71,300. However, everyone’s personal circumstances, from their income to their credit score, will influence the amount (and types) of debt they can realistically afford to hold. So while it is quite common for Canadian consumers to have mortgages, credit card debts, auto loans and more, always make sure you are following the best practice for your own circumstances.
What is insolvency?
Insolvency is the technical term for when you are no longer able to pay your bills. Insolvency is a legally protected status, and can be determined with the help of a Licensed Insolvency Trustee. Once you are declared insolvent, you have certain debt solutions option to you - such as consumer proposals and bankruptcy.
How do I know if I am in financial trouble?
An excellent guide to your financial health is the level of your monthly debt payments. The government advises that no more than 10% of your monthly income should be spent on debt payments; if you’re significantly above this level then it might be time to restructure or address your debt. Similarly, if you habitually rely on payday loans, bridging loans, or frequently miss debt payments, then it’s probably time to get some help.
What is the best way out of debt?
The best way out of debt will depend on your particular circumstances, as your income level, assets, type and level of debts, monthly expenses, and so on will all impact your available choices and the best route for you. To understand how you can clear your debts, start by performing a thorough analysis of your finances. You can get help in doing this from financial institutions, Licensed Insolvency Trustees, private companies and even the government.
When should I get help with my debt?
It can be hard to know exactly when to get help with your debt, and many people wait until they are suffering calls from debt collectors, or seeing their wages garnished. It’s better, if possible, to try and deal with debt early, before these issues escalate. If you are in any way concerned about the amount of debt you hold, if your monthly debt payments are becoming burdensome or are a significant fraction of your monthly expenses, then it might be time to get some help. It’s never too late though, so if you are worried by debt collectors, lawsuits or wage garnishments, then you can still find help and relief.
What is the difference between secured and unsecured debt?
Simply put, secured debt is secured against some collateral, like a house, and unsecured debt is not secured against anything. Common types of secured debt include mortgages, auto loans, secured credit cards; unsecured debts include payday loans, personal lines of credit, and credit cards. When you are unable to pay your secured debts, your creditors have the option of seizing the securing asset (such as the house or car) to pay off the loan.
What is the best place to get advice on managing debt?
There are plenty of companies and agencies in Canada that offer advice and products that seemingly help consumers out of debt, but it’s good to be wary before paying anyone for their advice or help. Some of these companies are for-profit businesses that care less about your debt than they do about collecting high fees from you. If you’re struggling with debt and think you might be insolvent, speak to a Licensed Insolvency Trustee. These professionals are federally regulated and unbiased. There are also non-profit agencies and organizations that can provide counselling and advice, with nominal or no fees.
