Tips to Manage Rising Consumer Costs 

Increases in essential costs of living aren’t a new foe for British Columbians, with day-to-day expenses from rent to groceries to gas having noticeably risen in recent years. Although most people can’t substantially cut their living expenses, there are some things you can try to gain some financial breathing room.

Prioritize Your Household Budget

A monthly personal budget that’s balanced to your specific situation and goals is a cornerstone of having control of your finances. Whether you already have a budget, or you are putting one together for the first time, create a budget to plan:

• Anticipated regular income
  • If your income varies use your lower earnings as an estimate, and don’t bank on irregular cash injections such as tax refunds.
• Fixed expenses such as rent and vehicle payments
• Categorizing and managing monthly variable expenses like groceries and personal spending
  • Be sure to budget a monthly allowance to cover irregular expenses, such as annual insurance renewals.

Once your new budget is decided, track your actual income and spending to see whether adjustments should be made to get your budget plans and financial realities in-line. Also pay extra attention to your personal spending habits, and related emotional drivers. For example, you may want to unsubscribe from retailer emails that compel you to spend more simply because there’s a sale you don’t want to miss out on.

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Reconsider Your Non-Essential Costs 

Beyond your grocery cart, scrutinize expenses you have control over, and reconsider whether you will continue spending money on non-essentials you may decide no longer make the cut. Costs to evaluate might include:

• Tiers for services such as TV and digital streaming, shopping and app subscriptions
• Banking costs, including credit card fees, interest rates, and balance protection insurances
  • There are many options for free banking, and no-fee credit cards.
  • Depending on your circumstances, it may not be worth having balance protection insurance, as premiums are based on your balance and in many cases the coverage does little to reduce your balance.

Debunking Common Consumer Debt Myths – Learn More

It’s important to remember that budgeting is intended to be a tool used to your benefit, not a punishment – and deciding on your spending priorities, needs and wants, are important components that everyone should consider, regardless of income levels.

Book Your Free Consultation

Tips for Future and Emergency Financial Planning 

After weathering a global pandemic and aggressive inflation, many consumers are feeling weary about what they can do to future-plan. While we can’t control all the external influences, taking charge of what is within your power can help you mitigate unforeseen challenges that may come.

Keep Your Income Taxes Filed (and Paid) Up-To-Date

Even if you don’t expect to owe, it’s in your best interest to keep paperwork and personal tax filings up to date (and clear any balance payable as soon as possible). For example:

• Many government credits and benefits rely on Canada Revenue Agency (CRA) information
• Your Notice of Assessment from CRA is often the best way to easily prove your income for housing applications

Learn About Tax and Canada Revenue Agency Debt Forgiveness

Focus on Becoming Debt-Free

Paying down your personal debt is one of the most positive ways to improve your finances – and taking debt-stress out of the equation is doubly good for your wellbeing. Depending on your situation, you may consider strategies such as:

• Restructuring your debt, such as with a balance transfer or debt consolidation (consumers do also have options to consolidate without borrowing)
• If you’re stuck just making minimum payments on your debts each month, carefully review your account statements to understand if you are truly making progress. Sometimes as little as $10 from a $200 monthly payment actually goes to reduce the principal, the rest is eaten up by interest or fees
  • Making just minimum payments on even a $5,000 credit card debt can be a decades-long repayment plan.
• If you’re making only (or not much more than) minimum monthly payments on your debt and/or it will take you more than five years to pay off your non-mortgage debts, understand these are indicators that your personal debt situation is risky, and you may benefit from getting information and support from a Licensed Insolvency Trustee.

Do the “Rule of 60” Math

• Divide your total non-mortgage debts by 60 – does the number look like a monthly payment you could afford in order to pay your debts off in five years? If that five-year figure barely fits your budget (or doesn’t fit at all) then you can likely assume you will need a solution that will cut your debt.

Take 30 minutes to talk with a local Licensed Insolvency Trustee about your options and resources to help you get your debt paid off. Many consumers are surprised to learn about the solutions available to them, like a Consumer Proposal that both consolidates and reduces your debts, and it’s free to have a confidential consultation and get advice from a qualified professional.

Know that you are not alone – BC Licensed Insolvency Trustees are here to offer you resources and support. You can live free from debt and its overwhelming stress. Connect with a caring, non-judgmental Sands & Associates debt expert today to talk about your debt-free plan.

Book Your Free Consultation

The post How to Manage Personal Debt and Finances Through Economic Instability appeared first on Sands & Associates.

• Every day we provide debt advice and guidance to consumers with a range of needs, and a common thread is that “knowing is not owing” – people need to have the facts so they can make informed decisions about their unique situation.
• Even if you don’t consider your debt a problem, it’s important to understand your rights and responsibilities – owing money is stressful, there are many ins and outs when it comes to debt, and unfortunately what you don’t know can hurt you financially.

Read on as we break down 10 of the most common consumer debt myths and misconceptions. 

Myths About Debt You Owe

Myth: Creditors Can Always Sue You Over a Debt Owed

Fact: Canadian law sets out a statute of limitations on debt.

In BC, the Limitations Act caps the period of time a creditor has to take legal action against you (i.e. sue you) for a debt you owe. What this essentially means is that while the debt does remain payable, if it has been two years or more since you made a payment or acknowledged the debt in writing, then your creditor may not have further recourse to collect the debt from you, beyond putting notations on your credit history and sending you mail.

Myth: Co-signing Debt Makes You Responsible for Half

Fact: By co-signing a debt, you become equally responsible for repaying 100% of the unpaid balance to the lender.

When you co-sign a debt, if the original borrower doesn’t pay back the debt the lender can demand that anyone listed in the loan or agreement (i.e. the co-signer/co-borrower) repay the entire balance – not half. This type of liability is known as ‘joint and several’.

• Read your applications and lending agreements carefully to understand the terms of borrowing and who is responsible for what – these can change depending on the lender and whether they are considering an application/account for “additional cardholders” or “co-borrowers/co-applicants.” Always check the fine print!

Myth: Marrying Someone Makes You Responsible for Paying Their Debt

Fact: One spouse is not responsible for repaying the debts of the other spouse solely by virtue of marriage or cohabitation.

You are responsible for repaying debts you’ve co-signed for or taken on jointly (as discussed above), or debts triggered as marital debts by the act of separation under the Family Law Act. You cannot be suddenly made liable for a debt owed solely by your spouse just because you got married. Essentially, there is no way to “marry into” a debt.

Am I Responsible for my Spouse’s Debts? Learn More

Myth: You Should Always Buy Insurance Protection

Fact: Credit card balance protection insurance often isn’t “worth” its cost.

Some banks are quick to sell and aggressively promote various insurance products, and while some are worthwhile considerations, like life insurance for a young family, others provide little value in most circumstances – one of these Licensed Insolvency Trustees often caution against is ‘balance protection insurance’.

• Even if you don’t carry a balance each month you pay fees into this product, which can be as high as 1% of the purchases on the card. Over the course of one year, this could take a 20% credit card interest rate to more than 32%.
• The other issue is that in most instances where you’d expect the insurance to help, it does very little. For example, if you lose your job, it may cover the minimum payments for the period you are unemployed – but very little of these payments will reduce the balance you owe on the card.

Myth: Incorporating Your Business Fully Protects Owners Personally

Fact: While corporations may protect owners from their debts to some degree, there is still a personal liability created for certain debts that cannot be avoided.

This personal liability can include debts such as:

• Wages; GST and payroll remittances
• Debts you have signed a personal guarantee for

Many business owners are aware that essentially any debts a sole proprietor or partnership business accumulate are payable by their owners, since there is no distinction between business and owner, but unfortunately, some business owners have a false sense of security when it comes to protecting their personal assets and liabilities if they incorporate their business.

Myths About Managing Debt

Myth: There’s No Forgiveness or Renegotiation Option for Government Debts

Fact: You can have government debts reduced and cleared by filing a Consumer Proposal (or forgiven through bankruptcy).

A Consumer Proposal is a legal debt consolidation remedy that can be used to stop all interest, reduce amounts owing by up to 50-80%, and work out a payment plan for what you can afford to repay. Government debts like taxes, business GST, student loans, benefit overpayments and more – plus debts like credit cards, payday loans, lines of credit, etc. can all be dealt with using this powerful tool, which will also halt a wage seizure or bank account freeze.

Myth: Minimum Payments on Credit Cards are Enough

Fact: Making just minimum monthly payments may keep your account in good standing, but it’s not enough to get debt paid off without incurring considerable interest costs.

Many individuals fall into a trap of just making the minimum payments on their credit cards and assuming that they are making progress towards getting their debt paid off. The reality is that at 20% interest, making minimum monthly payments on a $10,000 debt could take more than 25 years to clear and will cost more than $12,000 in additional – and avoidable –  interest charges.

• Banks must disclose exactly how long it will take to pay off a debt if you make only the minimum payments, so you can see this breakdown on your own bill.
• If you can only afford minimum payments each month, you very likely have a debt problem and should talk with a Licensed Insolvency Trustee as soon as possible.

Compare Your Debt Options

Enter your total amount of debt (excluding mortgage and car loan) and we’ll show you a list of options.

Myth: Your Credit Score is a Reliable Indicator of ‘Financial Health’

Fact: A credit score is essentially a numeric rating used by lenders to determine whether they will loan money, and at what cost.

Part of the problem with taking a ‘good’ credit score as an indication of financial and debt health is that habits that drive a high rating are often at odds with habits that lead to financial success. Since a credit rating mostly measures whether you pay your bills on time it considers nothing about whether those bills are too high or if you have any savings or assets at all.

Myth: Debt Consolidation Must be Done by Borrowing

Fact: You can consolidate your debt without borrowing or interest by making a Consumer Proposal.

Many people considering how to manage their debts believe their options amount to consolidation loans, credit counselling programs, or bankruptcy – but these are not your only options!

• Consumer Proposals are an effective debt solution that allows you to consolidate your debts, repaying what you can afford, with the unpaid balance being forgiven by your creditors.
• This consolidation option requires no borrowing and interest charges (such as a consolidation loan), nor require you to pay added professional fees (such as credit counselling).

Myth: Canada has Government-Sponsored Debt Relief Programs

Fact: The Canadian government does not offer grants or programs for personal debt repayment other than the options provided by a Licensed Insolvency Trustee.

The Canadian government does not have government grants or debt programs available, but it does regulate legitimate legal debt relief options that are available through Canada’s designated debt help professionals – Licensed Insolvency Trustees – namely Consumer Proposals (to consolidate and cut debt) and bankruptcy (to get debt forgiveness), as well as some student loan relief administered through Canada Student Loans.

Get Information and Advice About Your Debt and Debt Options 

The best and safest way to get accurate information about debt, and your debt options and resources, is to reach out directly to a Licensed Insolvency Trustee local to your province and ask to have a free consultation – you don’t need a referral to talk confidentially with us.

• Sands & Associates is available for help seven days a week and we have options for in-person appointments, as well as full support over the phone and online videos.
• In about 30 minutes you should have a clear understanding of your situation and next steps in the debt solution you decide best fits your needs. Knowing is not owing! 

Get solutions, support, and a debt-free plan that’s right for you.

The post Debunking Common Consumer Debt Myths appeared first on Sands & Associates.

Having polled over 2,100 people from around the province who recently made an insolvency filing, the 2024 BC Consumer Debt Study offers unique insights into consumer debt issues across the province, exposing the realities of dealing with a personal debt problem and the serious impacts of debt issues on consumers’ health.

Sands & Associates President and Licensed Insolvency Trustee Blair Mantin joined CTV News to share key findings from the 2024 BC Consumer Debt Study.

Watch the clips here and learn more below:

• The 2024 BC Consumer Debt Study’s largest cohort (36%) said they had $25,000-$49,999 of debt (excluding vehicle loans/mortgages) when they started their debt relief process.
• Over half of individuals polled (56%) said credit card debt was the main type of debt they had – 4.5 times more than the next leading type of debt.
• Payday (or instalment) loans were the second-most reported (12%) type of problem debt for consumers, as well as tax debt (12%).
  • Payday loan usage has almost doubled as the main type of problem debt for BC Consumer Debt Study participants since 2020’s study (6.3% of respondents attributed their main type of debt to payday loans in the 2020 BC Consumer Debt Study).
• 72% of people surveyed said overwhelming stress was how they knew their debts were becoming a problem.

Common Issues Driving Consumer Debt in BC

Four of the five top-reported causes of problem debt for consumers polled in the 2024 BC Consumer Debt Study may be related to issues outside the individual’s immediate control:

• Almost 1 in 4 people surveyed said the direct main cause of their debt was using credit for essential costs of living income could not cover (24%).
• Illness, injury or health-related problems (11%), marital or relationship breakdown (7%) and job-related issues (7%) were also direct main causes of debt identified by survey participants.
• 27% of British Columbians polled in the study attributed the direct main cause of their debt to overextended credit due to general financial mismanagement.

Debt Problem Warning Signs

An emotional cue was the top warning sign of a debt problem for most people:

• Over 7 in 10 individuals surveyed (72%) said overwhelming stress was how they knew their debts were becoming a problem.
• Other top signs of a debt problem reported by consumers included: Only making minimum payments (58%) and seeing debt balances remain almost the same every month, despite making payments (55%).

4 Budget Issues That Point to a Debt Problem

Impacts of Problem Debt on Consumers

The BC Consumer Debt Study series reveals the devastating effects that money problems can cause consumers, with impacts experienced far beyond financial transactions. The effects of dealing with problem debt as reported by individuals polled included:

• Almost 4 in 5 people (79%) said their mental health suffered because of being in debt, and 3 in 5 individuals (60%) said their self-esteem suffered by being in debt.
• Over 4 in 5 people (84%) said they had a constant worry about debt.
• 78% had anxiety, 69% feelings of helplessness or hopelessness, and 61% had depression because of debt stress.
• Close to half (48%) of respondents said being in debt caused their physical health to suffer.
• Roughly 1 in 7 individuals said they experienced suicidal ideation because of their debt-stress.

Consumers Delaying Seeking Debt Help

Almost 4 in 5 people (79%) said their mental health suffered because of being in debt and despite this, only 6% of individuals said they sought help as soon as they knew they had a problem.

• 41% of consumers polled in the 2024 BC Consumer Debt Study said they waited more than two years before seeking help – a 51% increase since the 2018 BC Consumer Debt Study.
• Most survey respondents (62%) say they waited to seek professional debt help because they wanted to manage debt on their own.
• More than half (54% and 51% respectively) said they waited because they felt ashamed they couldn’t handle the debts they incurred or were embarrassed to ask for help.

Misinformation remains a concerning barrier for individuals dealing with overwhelming debt:

• More than 1 in 4 consumers surveyed (27%) said they delayed seeking help for their debts because they didn’t know where to seek help.
• Nearly a third of individuals polled (32%) said they waited to seek professional debt help because they thought there was no solution to their situation. 

Learn About Debts You Can Include in a Consumer Proposal 

Solving Debt Problems

• Roughly 1 in 3 people surveyed (34%) tried to deal with their debts by applying to extend credit limits on existing debts.
• 26% of consumers said they applied for consolidation financing, while 25% used payday or instalment loans, and 5% asked family or friends to co-sign a consolidation loan (5.2%).
  • 33% of people said they borrowed from family or friends to make debt payments.

Individuals who recently used a legal debt relief process were surveyed for the 2024 BC Consumer Debt Study, with 85% of respondents who ultimately reorganized their debts using a Consumer Proposal, and 15% who sought debt forgiveness through Personal Bankruptcy.  The debt relief option of choice for consumers has changed remarkably in recent years, with Consumer Proposals now far outpacing bankruptcy.

• Over 90% of individuals polled in the 2024 BC Consumer Debt Study expressed satisfaction with their choice to file a Consumer Proposal or Personal Bankruptcy to deal with their debts.

Real Stories – Learn More from BC Consumer Sharing their Personal Stories

Where to Get Safe, Professional Debt Help

Blair Mantin, President of Sands & Associates, the firm of Licensed Insolvency Trustees who perform the debt study series, says that solving a debt problem independently can be nearly impossible for many people, and that unfortunately many consumers become overwhelmed and are unaware of the support available to them.

As Blair explains, BC residents are encouraged to seek support and solutions from a Licensed Insolvency Trustee at the onset of a debt problem, and consumers should know that:

• You can connect directly with a Licensed Insolvency Trustee local to your area to seek free, confidential debt advice and explore all your options for dealing with debt.
  • No referral or payment is necessary to have a free consultation, and there are no pre-qualifiers to meet.
• Consumers should be on guard against debt settlement agents and third-party referral sources that attempt to sell inferior or unregulated debt help services.
  • Licensed Insolvency Trustees are Canada’s only official debt help experts, fully qualified and endorsed to provide guidance on dealing with your debt, and a range of debt management services.
• You don’t need to be facing an extreme financial situation to seek information from a Licensed Insolvency Trustee – anyone can get free, confidential advice about their situation and options.

Sands & Associates believes that open conversations and non-judgmental support are key to removing barriers for people struggling with debt. If you are feeling worried or stressed about your debt, or want to explore debt management solutions and resources, connect directly with a Licensed Insolvency Trustee local to your area for a free confidential consultation.

Sands & Associates is BC’s largest firm of Licensed Insolvency Trustees focused exclusively on non-judgmental debt help for consumers and our full suite of services is available by phone, video, or in person at a local BC office near you.

The post New Debt Study Uncovers How Debt Problems Impact BC Consumers appeared first on Sands & Associates.

Findings from Sands & Associates’ 2024 BC Consumer Debt Study were released today, offering insights into consumer debt issues across the province. The twelfth annual study polled over 2,100 people from around British Columbia who recently made an insolvency (formal debt relief) filing, inviting individuals to share their personal insights and journey when dealing with a debt problem.

As Blair Mantin President of Sands & Associates, BC’s largest firm of Licensed Insolvency Trustees focused on consumer debt help explains, the annual study series aims to highlight the causes and effects of problem debt on British Columbians:

“Consumers are waiting longer than ever before to seek help, and as leaders in BC’s debt management sector, we feel it’s one of our key responsibilities to bring these issues – and solutions – to light.

Licensed Insolvency Trustees see firsthand how deeply financial challenges impact people, in virtually every aspect of their lives – and one of the most frustrating things is that so many consumers feel they are alone and don’t know they have resources available to help them solve these issues and move forward with their lives.”

Click here to read the full 2024 BC Consumer Debt Study report.

Click here to view and download the 2024 BC Consumer Debt Study infographic.

Key Takeaways from the 2024 BC Consumer Debt Study

• 79% of British Columbians polled in the 2024 BC Consumer Debt Study said their mental health suffered because of being in debt.
• Debt-stress resulted in: constant worry about debt (reported by 84% of consumers); anxiety (78%); poor sleep (70%); alienation from family or friends (30%).
• 72% of individuals surveyed said overwhelming stress was how they knew their debts were becoming a problem.
• 41% of survey participants waited more than 2 years before seeking help with their problem debt.
• 56% of people said credit card debt was the main type of debt they had, and the top two direct main causes of debt reported by all consumers were: overextended credit due to financial mismanagement (27%) and using credit for essential costs of living income could not cover (24%).

How British Columbians Are Accumulating Debt

Consistent with past BC Consumer Debt Study statistics, the largest cohort (36%) of 2024’s study participants had between $25,000-$49,999 of debt (excluding vehicle loans/mortgages) when they started their debt relief process, and 29% of consumers polled described their credit rating as ranging between ‘good’ to ‘excellent’ at the time of their insolvency filing.

Four of the five top-reported causes of problem debt may be connected to conditions or events outside consumers’ immediate control:

• Almost 1 in 4 people surveyed said the direct main cause of their debt was using credit for essential costs of living income could not cover (24%).
• Illness, injury or health-related problems (11%), marital or relationship breakdown (7%) and job-related issues (7%) were also direct main causes of debt identified by survey participants.
• 27% of British Columbians polled attributed the direct main cause of their debt to overextended credit due to general financial mismanagement.

Three types of debt that Licensed Insolvency Trustees often categorize as high-risk due to the costs of borrowing and likelihood of balances becoming unmanageable were highlighted in the 2024 BC Consumer Debt Study:

• Over half of individuals polled (56%) indicated credit card debt was the main type of debt they had – 4.5 times more than the next leading type of debt.
• Payday (or instalment) loans were the second-most reported (12%) type of problem debt for consumers, as well as tax debt (12%).

Most participants in the 2024 BC Consumer Debt Study (94%) said their household has been impacted by recent inflation increases:

• The largest cohort (85%) said inflation has their household now spending more on necessities such as food and gas.
• 53% of participants said their household is now spending more on shelter and utilities, and 51% said their household is no longer able to accumulate as much savings.

How Problem Debt is Affecting British Columbians

Individuals who participated in the 2024 BC Consumer Debt Study reported a devastating range of impacts from debt, affecting virtually all aspects of everyday life:

• Over 7 in 10 people surveyed (72%) said overwhelming stress was how they knew their debts were becoming a problem.
• Other top-reported signs of a debt problem that consumers identified included: Only making minimum payments (58%); seeing debt balances remain almost the same every month, despite making payments (55%).

Close to 4 in 5 people (79%) said their mental health suffered because of being in debt and 84% of individuals surveyed said they had a constant worry about debt:

• 3 in 5 of all individuals polled (60%) said their self-esteem suffered by being in debt; 78% had anxiety, 69% feelings of helplessness or hopelessness, and 61% depression because of debt stress.
• Roughly 1 in 7 people said they experienced suicidal ideation because of their debt-stress.

Nearly half (48%) of individuals polled also said being in debt caused their physical health to suffer, while close to one-third (32%) of consumers said their relationships suffered as a result of being in debt, and 29% said they had to put life events on hold being in debt.

What Consumers Did to Solve Problem Debt

Prior to seeking professional debt help from a Licensed Insolvency Trustee, consumers attempted to manage their debt with a range of actions, including many that required additional borrowing:

• Over 1 in 3 people surveyed (34%) tried to deal with their debts by applying to extend credit limits on existing debts.
• 26% of individuals said they applied for consolidation financing, while 25% used payday or instalment loans, and 5% asked family or friends to co-sign a consolidation loan.
  • Over a third (33%) said they borrowed from family or friends to make debt payments.
• 10% of British Columbians polled said they attempted to deal with their debt by working with a credit counsellor, and 7% by working with a debt repayment agent.

Individuals who recently made a formal insolvency (debt relief) filing were surveyed for the 2024 BC Consumer Debt Study, with 85% of respondents who ultimately reorganized their debts using a Consumer Proposal, and 15% who sought debt forgiveness through Personal Bankruptcy, reflecting that debt relief for consumers has changed remarkably, with Consumer Proposals now far outpacing bankruptcies as the debt solution of choice.

Why People Are Waiting to Seek Debt Help

Only 6% of consumers polled in the 2024 BC Consumer Debt Study said they sought help as soon as they knew they had a problem, and sadly the largest portion of individuals (41%) waited for more than 2 years before seeking help – a 51% increase since the 2018 BC Consumer Debt Study.

• Most survey participants (62%) say they waited to seek professional debt help because they wanted to manage debt on their own.
• More than half of consumers polled (54% and 51% respectively) said they waited because they felt ashamed they couldn’t handle the debts they incurred or were embarrassed to ask for help.

Misinformation remains a significant issue in reaching individuals to offer support and solutions:

• Over 1 in 4 BC consumers surveyed (27%) say they delayed seeking help for their debts because they didn’t know where to seek help and 15% said they delayed because they had misinformation about how the Consumer Proposal and/or Bankruptcy process worked.
• Nearly a third of people (32%) said they waited to seek professional debt help because they thought there was no solution to their situation.

How Insolvency Has Influenced Financial Outlooks

Over 90% of the individuals polled in the 2024 BC Consumer Debt Study expressed satisfaction with their choice to file a Consumer Proposal or Personal Bankruptcy to deal with their debts, and most individuals say that their experience receiving professional debt help also improved their finances and overall financial literacy:

• Two-thirds of survey respondents (67%) said getting professional debt help allowed them to improve their budgeting and/or savings skills.
• More than half of individuals polled (55% and 53% respectively) say they are now more confident in day-to-day financial management and have a better understanding about credit and borrowing.

Click here to read the full 2024 BC Consumer Debt Study report.

Click here to view and download the 2024 BC Consumer Debt Study infographic.

View the BC Consumer Debt Study series here.

For further details about BC Consumer Debt Studies or media inquiries contact Sands & Associates President Blair Mantin.

About Sands & Associates and the BC Consumer Debt Study Series

Since founding in 1990 Sands & Associates has grown to become a leader in BC’s debt help industry, now the province’s largest firm of Licensed Insolvency Trustees dedicated to debt services for consumers and small business owners. Sands & Associates’ “debt smart with heart” approach is at the core of our award-winning service, and we believe this is crucial to providing support to individuals in need.

It is our goal to promote open, honest conversations and increase awareness and support for consumers experiencing financial challenges and the BC Consumer Debt Study series offers a unique opportunity for understanding these deeply personal and often private struggles.

You are not alone in dealing with a debt problem, and you have options to clear debt and move forward with a financial fresh start. Connect with a local Sands & Associates expert today to take back control of your finances – book your free, non-judgmental debt consultation now.

The post Consumers Delay Seeking Debt Help Despite Drain on Mental Health – Latest BC Consumer Debt Study appeared first on Sands & Associates.

What Professionals Offer Consumer Debt Management Services in Canada?

There are two types of debt help professionals in Canada: Licensed Insolvency Trustees and informal debt service providers, who may use many different titles.

• Titles like credit counsellor, debt advisor, or debt consultant are not regulated ‘professionals’ and anyone can use these names to purport to offer debt management and related services.

Licensed Insolvency Trustees: Established as Canada’s only official debt help professionals and the people who can administer legal solutions that allow you to have some, or all your debts forgiven.

• Common debt solutions and relief Licensed Insolvency Trustees provide to individuals include Consumer Proposals (a specialized type of non-borrowing consolidation where you can consolidate and cut your debt without interest or added fees), and personal bankruptcy for full debt forgiveness.
• With a Consumer Proposal you can avoid both bankruptcy and more borrowing – and:
  • Consolidate and cut virtually all types of debt, from credit cards to tax debt, CERB overpayments to payday loans, overdrafts, student loans and more.
  • Offer to repay what you can afford (often as little as 20-50% of your total balance) over a period up to five years, and creditors will agree to forgive the unpaid balance so you can move on with your life.
  • Pay no further interest, consolidation costs, or professional fees.
  • Legally protect your assets and stop creditors from pursuing you for payments (including garnishments and seizures by even government creditors such as Canada Revenue Agency).

Consumer Proposals are an advantageous debt solution of choice for people who may have previously considered filing for bankruptcy, or are looking at costly consolidation loans to manage their debt.

Credit Counsellors: May offer different types of debt help services through for-profit and non-profit organizations.

• Although they may include free education as part of their offerings and resources, credit counsellors charge for their debt management services (such as monthly debt repayment plans) and these costs may include: Fees for initial set-up, monthly maintenance, application, membership, and more.
• You may need to pay fees even if creditors refuse to negotiate or make a deal with you through your credit counsellor.

Debt Consultants: These agents may operate in a few ways, one by offering debt settlement services like a credit counselling repayment plan, another is by acting as an agent for a person who wants to work with a Licensed Insolvency Trustee on a Consumer Proposal.

• Some credit counsellors and debt consultants may say they are certified by an accreditation body, but there is no certification body in the debt advisory sector that is widely recognized or reputable.
• Agents may hold a business registration and pay license fees to operate as a debt repayment agency, but this is not the same as being part of a fully regulated profession.

Insolvency filings across the country are on the rise as consumers face a slew of financial challenges contributing to problem debt. At the same time, the Government of Canada has published observations about debt advisor services, flagging specific concerns about the risks unregulated advisors pose, especially where consumers are looking for Consumer Proposals and bankruptcy relief.

Should I Work with a Debt Settlement Agent or Credit Counsellor? What’s the Difference?

Misleading Debt Services Being Sold to Consumers

Over the years consumers have endured predatory unlicensed debt services such as scammy companies operating US-based debt pooling, shady agents charging huge upfront fees without results, misleading quick-repair credit rebuilding services and more. Unfortunately, official efforts to curb these issues take time to have an impact and sadly, many consumers suffer the adverse effects before then.

Issues that have recently caught the Federal Government’s eye involve the debt advisory marketplace, and its impact in the insolvency system. There are several concerns within the industry, including consumers being sold and charged for what may be dishonest and less than transparent services, including:

• Being referred to a Licensed Insolvency Trustee (“LIT”) by a third-party agent.
• Insolvency advisory.
• Consumer Proposal exit loans.
• Insolvency filing insurance.

Consumers do not need a third party’s services to safely access impartial advice and solutions through a Licensed Insolvency Trustee. If you hire another advisor for services related to your Consumer Proposal or bankruptcy, understand these are completely unnecessary add-on services, and offered by agents who are not qualified to administer the Consumer Proposal or bankruptcy for you. 

Consumer Proposals are not loans and require no insuring, they are a legal type of debt consolidation solution only a Licensed Insolvency Trustee can administer for you. If you are offered or encouraged to use any type of financing to complete a Consumer Proposal, understand this is not only unnecessary, but counter-productive to cost advantages of a Consumer Proposal (namely, consolidation without borrowing or interest and stopping previous interest charges from accumulating).

Am I Working with a Licensed Insolvency Trustee?

The best thing to do is simply ask “Are you a Licensed Insolvency Trustee?”. You can also use the Government of Canada’s “find an active Licensed Insolvency Trustee” directory, and if you’re located in British Columbia, Sands & Associates can help you.

• It is against the law for an agent to say they can manage a Consumer Proposal (or bankruptcy) for you unless they are a Licensed Insolvency Trustee.

If you’re looking for debt help online, be aware that advertising can be misleading – ‘government approved’ ‘licensed’ and ‘fast credit repair’ are all examples of this. Beyond options a Licensed Insolvency Trustee offers, there is no government debt ‘program’, and ‘quick credit repair’ simply doesn’t exist.

• A Consumer Proposal (or bankruptcy) can ONLY be filed through working with a Licensed Insolvency Trustee, and, as noted – you do not need any sort of referral to connect with a Licensed Insolvency Trustee to explore or start the process.
  • If you’ve been advised against a Consumer Proposal by anyone other than a Licensed Insolvency Trustee, you should get a second opinion from a Licensed Insolvency Trustee.
• Your credit rating is related to your credit history, and building a credit history that demonstrates responsible credit use simply takes time and careful habits, such as:
  • Paying all your bills on time.
  • Keeping credit balances under 50% of your total credit limit.
  • Having a consistent employment history.

Understanding Credit Reports and Scores in Canada – Learn More

Recap – Key Takeaways for Consumers Seeking Qualified Debt Advice

1. Most creditor counsellors and all Licensed Insolvency Trustees will offer you a free consultation to help you come up with a plan to manage your debts – but it’s essential to understand:

If you choose to take advice from or work with any sort of debt help professional other than a Licensed Insolvency Trustee, there are considerable gaps in regulations and consumer protection.

• In BC some provincial guidelines exist around people who charge a fee to negotiate with a creditor on your behalf, but, legally, anyone can provide debt management advice services, and there is no federal authority regulating people calling themselves credit counsellors, debt agents and the like.
• Credit counselling organizations are heavily bank-funded, and some may promote their plans over other options you have, as they make money from creditors, usually a flat percentage commission of the debt they recover. Remember: Non-profit does not mean a charity, and it doesn’t speak to quality or reputation either.

2. No referral is required to talk with a Licensed Insolvency Trustee and receive qualified free, confidential advice about your situation and all your options. It is highly recommended that you connect directly with a Licensed Insolvency Trustee local to your province.

• Licensed Insolvency Trustees are professionals who provide specialized debt support and debt management services under the authority of federal regulations and legislation, operating without the limitations of credit counsellors and other debt agents.

Dealing with a debt problem can feel overwhelming, but you are not alone. Whether you are interested in consolidating and cutting debt with a Consumer Proposal, debt relief through personal bankruptcy, or aren’t sure what options are available to you – you can turn to a Licensed Insolvency Trustee for support and virtually all debt-related questions and concerns. 

• We will walk you through all options to address your debts including (but not limited to): various repayment and consolidation strategies, supportive resources, credit counselling programs, Consumer Proposals, and bankruptcy.

Sands & Associates’ full suite of debt advice and debt help services is available to consumers at local offices throughout BC, as well as over the phone, or online video – whatever is most comfortable and convenient for you.

Talk with a local debt expert and get a personalized debt-free plan that’s right for you. Book your free, confidential debt consultation today.

The post Unqualified Debt Advisors – What Consumers Need to Know appeared first on Sands & Associates.

Having polled over 1,700 participants who recently restructured their debts using a legal debt solution, the 2023 BC Consumer Debt Study offers a unique view into consumer debt issues in the province. Blair Mantin, President of Sands & Associates, the firm of Licensed Insolvency Trustees who undertook the study, joined CTV News to discuss the study’s findings.

Watch the clips here and learn more below:

Recent BC Consumer Debt Problems – by the Numbers

• The 2023 BC Consumer Debt Study’s largest proportion of participants (36%) said they had $25,000-$49,999 of debt (excluding vehicle loans/mortgages) when they started a formal debt relief process.
• Almost 3 in 5 people (58%) said credit card debt was the main type of debt they had, nearly five times higher than the next debt type.
• Close to 1 in 8 individuals (12%) claimed payday or instalment loans was their main type of debt, and tax debt (personal income tax, GST, etc.) took the third spot at 11%.

Credit cards and payday loans can be considered interest-heavy credit, and consumers can easily develop a borrow-repay-borrow cycle that is often impossible to break with interest rapidly accumulating. 

Dos and Don’ts for Credit Cards and Managing Your Credit Card Debt – Read More

What Are Some Common Causes of Personal Debt Problems?

The common causes of debt revealed in the 2023 BC Consumer Debt Study expose the vulnerability of many consumers when it comes to their ability to financially weather personal and economic challenges. Five of the top six common causes of debt as reported by insolvent consumers relate to triggering events or circumstances that are likely beyond an individual’s clear control:

• Just over a quarter of BC consumers polled (27%) said their debt was caused by overextended credit due to general financial mismanagement.
• Closely following, the second-most reported cause of debt for 1 in 4 consumers (25%) was using credit for essential costs of living income could not cover.
• Following these, the remaining top six causes of individuals’ debt were attributed to: Illness, injury, or health-related problems (11%); Marital or relationship breakdown (7%); Job related issue (5%) and Pandemic-related job loss or reduction in work hours (5%).

95% of individuals participating in the 2023 BC Consumer Debt Study said their household has been impacted by recent inflation increases, with the largest proportion (88%) noting inflation has their household now spending more on necessities such as food and gas.

• Half (50%) also say their household is no longer able to accumulate as much savings, leaving consumers further exposed to difficulties in meeting unanticipated financial needs.

There was a bright spot in the findings; however, with over 4 in 5 people (87%) saying their insolvency filing (making a Consumer Proposal or declaring Personal Bankruptcy) has helped them manage day-to-day finances despite noticeable rising costs.

What Happens When You Can’t Pay Your Debt? Learn More

Steep Costs of Unmanageable Debt – Coping with a Debt Problem

Individuals participating in the 2023 BC Consumer Debt Study reported a range of ‘symptoms’ brought on by their unmanageable debt, including:

• 4 in 5 people (83%) said they had a constant worry about debt.
• Nearly 4 in 5 people (79%) said their mental health suffered by being in debt, and 3 in 5 (61%) said their self-esteem suffered because of being in debt. Almost half of respondents (49%) said debt caused their physical health to suffer.
• Over three-quarters of individuals surveyed (77%) said they experienced anxiety from the stress of debt; also 66% feelings of helplessness or hopelessness, and 61% depression.
• Almost 1 in 6 people (16%) said they experienced suicidal ideation because of their debt-stress.

Debt Warning Signs and Delays Seeking Debt Help

Over 7 in 10 people polled (71%) said overwhelming stress was how they knew their debts were becoming a problem – and despite this, more than 96% of survey respondents did not seek professional help right away. 

• Most respondents (64%) said they waited to seek professional debt help because I wanted to manage my debt on my own.
• Further top reasons individuals said they waited to seek professional support were: I felt ashamed I couldn’t handle the debts I had incurred (56%) and I was embarrassed to ask for help (51%).

Other top-identified signs of a debt problem reported by consumers were more transactional:

• Only making minimum payments (60%).
• Seeing debt balances remain almost the same every month, despite making payments (55%).

A lack of visibility around legal debt help resources was also a significant barrier that contributed to individuals postponing seeking professional support, with a third of survey respondents (34%) saying I thought there was no solution to my situation; more than 1 in 4 (27%) I didn’t know where to seek help and 17% I had misinformation about how the Consumer Proposal and/or Bankruptcy process worked.

Debt Forgiveness with Personal Bankruptcy: Step-by-Step

How Did People Attempt to Solve Their Debt Problems?

Despite the significant personal impacts of their debt issues, fewer than 4% of people polled said they sought help right away from a debt help professional, and, in this time, individuals attempted a variety of different tactics to solve their debt problems.

• Many people turned to more borrowing to try to manage their debt, with over a third of survey participants (36%) saying they applied to extend credit limits on existing debts and 34% who borrowed from family or friends to make debt payments.
• More than 1 in 4 individuals (26%) applied for consolidation financing; 25% used payday or instalment loans, and 4% asked family or friends to co-sign a consolidation loan.

Participants in the 2023 BC Consumer Debt Study overwhelmingly used a Consumer Proposal to legally consolidate and cut their debt (81% of study respondents), and over 90% of all individuals surveyed said they were satisfied with their decision to eliminate their debts with an insolvency process.

More people than ever before are choosing to use a Consumer Proposal to consolidate and cut their debt, rather than file for bankruptcy. 

Learn More About Consumer Proposals

Getting Debt Help – Where Consumers Can Get Qualified Support

Blair Mantin, President of Sands & Associates, says that, unfortunately, it can be frustrating and discouraging for consumers who attempt to self-manage their debt for too long, and that overwhelmed consumers are highly vulnerable to inferior, unregulated, and even illegal services sold by debt settlement agents or debt advisors.

• Consumers are encouraged to get impartial and accurate advice from a Licensed Insolvency Trustee at the onset of a debt problem.
  • Licensed Insolvency Trustees are Canada’s only established debt help professionals and are fully regulated, qualified, and endorsed to serve Canadians with a range of debt management services and advice.
  • You do not need to be dealing with an extreme situation to seek support from a Licensed Insolvency Trustee, and consumers can get free, confidential advice at any point.
• Connect directly with a local Licensed Insolvency Trustee to better understand your situation, get accurate information, and explore all possible options in a free, confidential debt consultation.
  • No referral, payments, or third-party agents are necessary. 

Non-judgmental debt support for individuals and a full suite of debt help services is available to you. Connect with a caring local debt expert by phone, video, or in-person – book your free, confidential consultation today.

The post New BC Study Explores Personal Debt Problems in the Province appeared first on Sands & Associates.

Findings from the 2023 BC Consumer Debt Study were released today, presenting a unique exploration of consumer debt issues in the province. The eleventh annual study surveyed over 1,700 people from around the province who recently restructured their debts using a Consumer Proposal, or filed for Bankruptcy, inviting these individuals to share honest personal insights into their experiences dealing with debt, and finding solutions to these difficulties.

Conducted by Sands & Associates, the BC Consumer Debt Study series is the only study of its kind focused on BC and, according to Sands & Associates President and Licensed Insolvency Trustee Blair Mantin, the annual studies offer an opportunity to understand the realities of the financial challenges people across the province face, and the many facets of a debt problem. As Blair explains:

“As Canada’s debt help professionals, we know that when debt is unmanageable it carries impacts to a person that are far beyond account balances or credit scores. People’s mental health, relationships, physical health and more suffer seriously under this burden, and the emotional beating they take often causes them to struggle alone for months and even years.

In our current post-COVID, high inflation environment consumers are constantly facing a barrage of financial challenges and if uncontrollable debt is one of them, we know that things can deteriorate quickly. It is critical for people to have support, know where and how to access it, and have confidence in the resources available to help them resolve a debt problem and move forward with life.”

Click here to read the full 2023 BC Consumer Debt Study report

Click here to view and download the 2023 BC Consumer Debt Study infographic

Consumer Debt Issues in BC – Highlights from the 2023 BC Consumer Debt Study 

The largest proportion of participants in the 2023 BC Consumer Debt Study (36%) said they had $25,000-$49,999 of debt (excluding vehicle loans/mortgages) when they started a formal debt relief process.

• 30% of all study participants described their credit rating as ranging from ‘good’ to ‘excellent’ at the time of making a Consumer Proposal or filing Bankruptcy.
• Close to 3 in 5 people (58%) said credit card debt was the main type of debt they had, almost five times higher than the next debt type.
• Roughly 1 in 8 individuals (12%) claimed payday or instalment loans was their main type of debt, the highest proportion of this type of debt in the BC Consumer Debt Study series history.

Other trends may indicate consumers have become less able to accumulate and maintain a large debt-load, and that the access to Consumer Proposals as a debt management alternative to Bankruptcy has increased substantially:

• 2023’s study had the highest number of participants ever indicating their debt levels were below $25,000 when they started a Consumer Proposal or Bankruptcy, while the number of people who indicated having debt levels of $100,000 or more was the lowest ever.
• The proportion of Consumer Proposal filings (over Bankruptcy) in BC has increased significantly over time. As illustrated by respondents in the BC Consumer Debt Study series, Consumer Proposals as the solution of choice rose from 20% of respondents in 2012’s study, to a whopping 81% of respondents in 2023. 

Behind the Debt: Economic Issues and More

Consumers appear vulnerable to a range of personal and economic issues outside their immediate control that may create financial strain that ultimately develops into a debt problem:

• Just over a quarter of BC consumers polled (27%) said their debt was caused by overextended credit due to general financial mismanagement.
• Closely following, the second-most reported cause of debt from 25% of consumers was using credit for essential costs of living income could not cover.
  • The proportion of individuals attributing their debt to a reliance on credit for living expenses increased from 20% in 2022’s study.
• The remaining top six causes of debt identified by consumers were: Illness, injury or health-related problems (11%); Marital or relationship breakdown (7%); Job related issue (5%) and Pandemic-related job loss or reduction in work hours (5%).

95% of the 2023 BC Consumer Debt Study respondents indicate their household has been impacted by recent inflation increases, with the largest proportion (88%) saying inflation has their household now spending more on necessities such as food and gas. Half (50%) also say their household is no longer able to accumulate as much savings, leaving consumers exposed to future challenges in meeting unexpected financial needs.

Signs and Symptoms of a Debt Problem 

More than 7 in 10 people polled (71%) said overwhelming stress was how they knew their debts were becoming a problem. 

• Other top-identified signs of a debt problem as reported by consumers were: Only making minimum payments (60%); Seeing debt balances remain almost the same every month, despite making payments (55%) and Accumulating more debt on credit accounts (37%). 

Study participants disclosed a range of personal impacts to coping with unmanageable debt, including:

• A constant worry about debt was present for over 4 in 5 people (83%).
• Almost 4 in 5 people (79%) said their mental health suffered by being in debt, and 3 in 5 (61%) said their self-esteem suffered because of being in debt. Nearly half of respondents (49%) said debt caused their physical health to suffer.
• 29% of people polled said the stress of debt caused them to alienate themselves from family or friends, and 30% said their relationships suffered due to debt-stress.
• Over three-quarters of those surveyed (77%) said they experienced anxiety from the stress of debt; also 66% feelings of helplessness or hopelessness, and 61% depression.
• Almost 1 in 6 people (16%) said they experienced suicidal ideation because of their debt-stress. 

Managing a Personal Debt Problem 

Although over 90% of people polled in the 2023 BC Consumer Debt Study said they were ultimately satisfied with their decision to eliminate their debts with an insolvency process, arriving at this positive solution unfortunately often takes an extended time – over 96% of survey respondents did not seek professional help right away. 

• Most respondents (64%) said they waited to seek professional debt help because I wanted to manage my debt on my own.
• Other top reasons individuals waited to seek professional support were: I felt ashamed I couldn’t handle the debts I had incurred (56%) and I was embarrassed to ask for help (51%).
• A lack of public awareness of debt management resources also remains a significant issue, with a third of survey respondents (34%) saying I thought there was no solution to my situation; over 1 in 4 (27%) I didn’t know where to seek help and 17% I had misinformation about how the Consumer Proposal and/or Bankruptcy process worked.

A variety of different tactics were used by BC consumers polled, as individuals attempted to solve their debt problems on their own, often turning to more borrowing as a solution:

• Over a third of survey participants (36% and 34% respectively) said they applied to extend credit limits on existing debts and/or borrowed from family or friends to make debt payments.
• A quarter of individuals (26%) applied for consolidation financing; 25% used payday or instalment loans, and 4% asked family or friends to co-sign a consolidation loan.

Outlooks and Attitudes Improved After Solving Debt Problems

In addition to positive sentiments around their choice of a Consumer Proposal or Bankruptcy to manage their debt, more than 4 in 5 participants (87%) said that filing a Consumer Proposal or declaring Personal Bankruptcy has helped them manage day-to-day finances despite noticeable rising costs.

Individuals polled additionally said their experience receiving professional debt help:

• Improved their budgeting and/or savings skills (69%).
• Has made them more confident in day-to-day financial management (59%).
• Gave them a better understanding about credit and borrowing (54%).

Debt study participants were also invited to share their retrospective advice to others, and to provide words of encouragement to others who may be facing similar struggles. We highly encourage readers to browse these personal insights shared, as highlighted within the 2023 BC Consumer Debt Study report. 

Click here to read the full 2023 BC Consumer Debt Study report

Click here to view and download the 2023 BC Consumer Debt Study infographic

2023 BC Consumer Debt Study infographic

View the BC Consumer Debt Study series here

For further details about BC Consumer Debt Studies or media inquiries contact Sands & Associates President Blair Mantin.

About Sands & Associates and the BC Consumer Debt Study Series

Sands & Associates was founded in 1990 and has grown to become an award-winning leader in the debt help industry, now BC’s largest firm of Licensed Insolvency Trustees focused exclusively on debt services for consumers and small businesses.

Taking a non-judgmental “debt smart with heart” approach to helping individuals deal with a debt problem is the foundation of Sands & Associates’ beliefs, and we feel that understanding the extent of a financial crisis is a crucial step in providing the right solutions and support to people in need.

It is our goal that the BC Consumer Debt Study series will continue to highlight challenges faced by individuals across the province and encourage members of professional and government organizations to take active steps to reach consumers in need early, and with the right support to achieve better outcomes.

Supportive debt relief services and debt restructuring solutions are available for BC residents via telephone, video, and in person at local offices throughout the province. Connect with a qualified local Sands & Associates debt expert today – book your free, non-judgmental debt consultation here.

The post Increasing Number of Consumers Turning to Credit for Costs of Living, with Impacts to Mental Health and More – Latest BC Consumer Debt Study appeared first on Sands & Associates.

Watch the clip here, and read more below:

What is a Reasonable Amount of Personal Debt?

There’s no ‘magic number’ when it comes to understanding how much debt is too much; for some people their debt problem shows up as $20,000, for another $5,000 – or even $100,000 for someone else – and much depends on each person’s unique situation.

Rather than relying on a specific number, consider not just your ‘on paper’ finances, but also how well you are coping with managing your debt and whether you are making clear progress towards paying your debts off.

If you are experiencing any of the following, consider this a sign your debt may be reaching a problem stage, or is potentially on its way to an urgent crisis:

• Often feeling stressed or worried about your debt.
• Making only (or slightly more than) minimum monthly payments on your credit card debt.
• Carrying debts with payments that use up a large portion of your regular income or that would take more than five years to pay off (non-mortgage debt).
• Regularly relying on credit cards (or using payday loans) to meet costs of living, or taking on more debt. (This could be increasing credit limits or considering a consolidation loan to manage debt.)
• Owing a government creditor such as Canada Revenue Agency a balance you can’t afford to pay off.
• Having multiple years of unfiled tax returns, especially if you are self-employed.
• Uncertainty as to who you owe debt to and how much is owed or just avoiding account balances altogether.
• Having borrowed against most of your home equity to consolidate or manage debts.
• Receiving collection action, including calls, wage garnishments or pending court dates.

Debt can snowball over time and because people get used to adapting to cope and manage the situation, dealing with a debt problem daily can all too easily start to feel ‘normal’. It’s important for each of us to do a financial check-in periodically and be honest in how we’re doing.

Identifying and cutting off a debt problem before it’s severe can save you untold amounts of time, stress – and of course money! Take an hour to connect with a Licensed Insolvency Trustee and get some qualified advice about managing your debt, and a personalized debt-free plan.

Debt Options Calculator – Compare Four Ways to Pay Off Your Debt

I Think I Have a Debt Problem – What Should I Do?

The first thing to understand is that if you think you have a debt problem – you’re almost always right. And if this is the case, the second thing to know is that the problem is almost always going to get worse if you don’t take some action.

Talking with a local Licensed Insolvency Trustee in your province is the first and best thing to do.

• Avoid trying to ignore the problem, or assuming you don’t qualify for help.
  • Consumers can access a Licensed Insolvency Trustee directly for support any time at no cost, there are no eligibility requirements to seek advice.
• Be cautious about where else you seek debt advice. Licensed Insolvency Trustees are the only government-qualified debt help professionals.
  • Advertisements from debt consultants and credit counsellors can be misleading and may imply a company is part of a ‘government program’, which is not the case. The only ‘government programs’ to deal with debt are those accessible by working with a Licensed Insolvency Trustee.
  • Be on guard for high-pressure sales tactics, up-front fees, high-interest loans, and unrealistic promises.

Talking with a Licensed Insolvency Trustee

Every day Licensed Insolvency Trustees provide advice to people who are dealing with problem debt or looking to pay off their debt with less interest and/or in less time.

• There is no cost to talk confidentially with a Licensed Insolvency Trustee and get guidance on the options available to you.

When you connect with a Licensed Insolvency Trustee it is our responsibility to ensure you are aware of and understand all your options. We help people make informed decisions on how to address their financial difficulties and move forward. We’ll review potential solutions such as:

• Credit counselling programs, and negotiating directly with your creditors.
• Consolidation loans, and consolidation without borrowing using a Consumer Proposal.
• Bankruptcy, and other laws or resources that may help you resolve your situation.

Many people have a difficult time asking for help or feel embarrassed or ashamed to be struggling with their finances. Please know, you owe it to yourself to get debt help and you are not alone. Licensed Insolvency Trustees are your best allies – here for you with solutions and support, not judgment.

What would your life look like, without debt? Take an hour to learn about your options and get a debt-free plan that’s right for you. Book your free, confidential consultation with a non-judgmental expert at Sands & Associates.

The post How Much Debt is Too Much? appeared first on Sands & Associates.

What is the Bank of Canada, and What Do They Do?

The Bank of Canada is the country’s central bank; it is a special type of Crown corporation belonging to the federal government that exists “to regulate credit and currency in the best interest of the economic life of the nation” with their primary role being “to promote the economic and financial welfare of Canada”.

Monetary policy is a core Bank of Canada function, and two main instruments used in this are its inflation-control target and the key policy rate:

• Inflation is the persistent rise in average price levels over time, and the Bank of Canada aims to maintain a stable price environment – a low, stable, predictable inflation is their goal. With price stability and low inflation, prices change so slowly there’s no major effect to how people spend, save, or invest.
• The Bank of Canada adjusts its key policy interest rate up or down as needed to achieve its inflation target. Doing so influences financial institutions’ interest rates, borrowing and spending, and pressure on prices.

What Does the Bank of Canada’s Interest Rate Mean for Other Banks?

Financial institutions borrow from each other and can also use the Bank of Canada, and by setting their policy rate the Bank of Canada encourages financial institutions to borrow and lend amongst themselves near the policy interest rate too. What this means is that although the public doesn’t borrow with the Bank of Canada, their policy rate affects interest rates on products such as:

• The prime rate for loans and lines of credit
• Mortgage rates
• Interest on savings and deposits

When the Bank of Canada changes their rate, lenders will generally adjust their prime rates shortly after.

• Prime rate is the annual interest rate our major banks and financial institutions use to set their interest rates for variable credit products, including loans, lines of credit and mortgages with a variable rate.

How Interest Rate Increases Impact Common Consumer Credit Products

Depending on which products (types of debts) you have, and whether your debts have fixed or variable interest rates, the impact of an interest rate increase can vary widely, from very significant to having no impact at all.

• When you have a fixed-rate debt you agree to pay the same interest rate over the course of your repayment term, regardless of shifts in the economic market.
  • One benefit with this type of borrowing is that you’ve got stability in paying the same interest rate (until you need to renew, such as with a mortgage at the end of a set term).
• With variable interest rates, as the prime rate goes up or down, so does the interest you’re being charged on your debt. When you apply for credit with a variable interest rate the lender will offer you an annual interest rate tied to the bank’s prime rate.

Below is a breakdown of different types of common consumer debts, and how they may be impacted (or not) by interest rate changes:

Mortgages

The biggest impact of interest rate increases is likely to be felt by homeowners who are carrying variable interest rate mortgages.

• On a variable rate mortgage, quite simply, most payments will see an increase because of rate hikes. Most banks adjust quite quickly – people might see the impact even by the next month.
• Just a small interest rate hike can be very impactful. For someone with a variable mortgage of 2-3%, even a 1% increase in interest rates can translate up to a 50% increase in the interest being charged on the mortgage.

Conversely, on a fixed rate mortgage, your payments will not increase as you have ‘locked in’ the rate you will be charged over the term of the mortgage. At renewal time however, you can expect that the rates you locked in at previously may no longer be available and your new interest rate upon renewal could be significantly higher.

Can I Get a Mortgage After a Bankruptcy or Consumer Proposal?

Lines of Credit and Home Equity Loans

Most lines of credit (whether secured against your home or not) are offered with a variable rate, which means there is a direct impact of an interest rate increase.

• Higher payments will be required immediately, and this can be very significant – especially if you are financially stretched and are capable of paying just interest only on your line of credit.

Vehicle Financing

Most vehicle loans are structured with a fixed interest rate, meaning that payments wouldn’t change at all.

Although an interest rate hike won’t cause a direct increase on your monthly vehicle financing payment with a fixed interest rate, individuals with vehicle financing should be aware that:

• If you decide to trade-in your vehicle before the end of your financing contract, you may absorb the ‘negative equity’ (i.e., the value of your vehicle, less the amount you still have to pay on the original loan contract).
• New loans applied for following an interest rate hike will most likely have higher interest rates, and as a result will come with an increased cost to borrow.

If you do have a vehicle financing contract with a variable interest rate component, normally a rate-hike will mean extending the time you’ll make payments so that the additional interest rate costs are paid. 

An Overview of ‘Seize or Sue’ and Vehicle Loans in BC – Learn More

Student Loans

If you have a fixed-rate student loan you won’t be impacted with increases in your interest rate or monthly payments, but following increases in prime rates, future student loans can become more expensive.

However, if your student financing is using variable rates, both your interest rate and minimum payments will increase with interest rate hikes.

Are Credit Cards Impacted by Interest Rate Changes?

Most credit card terms are set without regard for prime interest rates and if your only debt is on credit cards then your monthly payment requirements are unlikely to be impacted by an interest rate increase.

With standard credit card interest rates hovering near 20%, the very real danger of interest when it comes to credit card debt is that the interest charged is always expensive, regardless of fluctuations in the Bank of Canada rate.

• If you’re not paying off your credit card in full each month you accrue interest charges – a cost of borrowing – and then only a portion of your payment goes towards paying down the amount you actually charged on the card.
  • In some cases, just $10 of what you pay each month goes to reduce the balance; the remainder covers interest and finance charges that reoccur each month.
  • Check your monthly credit card statement to see a breakdown of how long it will take you to pay off your credit card balance if you only pay the minimum payments each month. The number might surprise you!
• If you miss a payment, you could find your bank raises your credit card interest rate because of the ‘delinquency’. Increases of up to 5-10% are not unheard of.

Dos and Don’ts for Credit Cards and Managing Credit Card Debt

What Can I Do About Rising Interest Rates?

The single biggest and best thing you can do to prevent or mitigate being impacted by interest rate increases is to pay down as much of your debt as possible – and even if you’re mainly carrying debts not likely to be impacted by rate hikes, the sooner you get out of debt the better.

• Calculate your “Rule of 60 Math”: Add up your total (non-mortgage) debt then divide that number by 60.
  • Is that figure a monthly payment you could afford to pay so that you’ll have your debt paid off in five years (60 months)?
  • If that hypothetical payment is not affordable for you, or you think it would be difficult to consistently manage, connect with a Licensed Insolvency Trustee about your options for dealing with debt – especially if you’re already in (or are approaching) a position of being over-extended.
• If you’re a mortgage holder, you may want to research options for locking in your mortgage to a fixed rate. Though often more expensive in the long-term, a fixed rate mortgage can give you certainty for your budget.
  • Be sure to shop around for the best rates and consider using a mortgage broker.
• Proceed with caution if you’re considering restructuring your debts with consolidation loans or balance transfers – it’s important to fully understand the full costs of borrowing before signing any documents.
  • If your credit history has been impacted by an unfavourable debt to income ratio you may find it difficult to qualify for a line of credit or consolidation loan at a low interest rate, or at all.
  • Make sure you can realistically stick to the budget needed to get your debt paid off and are not simply delaying an inevitable cash-crunch.

Learn More About Credit Reports and Scores in Canada

Consolidate and Cut Your Debt – Without Borrowing

Although you might consider a new loan or line of credit, a Consumer Proposal provides a welcome alternative to consolidate your debt without turning to more borrowing and paying interest charges:

• A Consumer Proposal allows you to pay off your consolidated debts without any further interest charges, and your creditors will agree to accept repayment of typically as little as 20-50% of your balance due, in full settlement of your accounts.
  • Virtually all types of debts can be consolidated and reduced with a Consumer Proposal – from credit cards to lines of credit, overdrafts, income tax debt, CERB overpayments, student loans and more.
• Your credit history or credit score are not factors for eligibility, and no co-signer is needed.
• You can pay off a Consumer Proposal early at any time without penalty.

Connect with a local BC Licensed Insolvency Trustee to learn more about Consumer Proposals and explore your options.

Licensed Insolvency Trustee Blair Mantin Talks Interest Rates and Debt Solutions

Sands & Associates President and Licensed Insolvency Trustee Blair Mantin joined Global News and Breakfast Television Vancouver to discuss what Canadian consumers should know about interest rates and debts, including what you can do to deal with problem debt. Watch the clips here:

Sands & Associates’ local office network serves communities across BC, and our full suite of debt help services is available online, by phone, or in-person. Connect today at no cost to discuss your situation and learn about your options.

The post Understanding Interest Rates – and Why They Matter if You Have Debt appeared first on Sands & Associates.

Watch the clip here, and read more below:

Potentially Risky Consumer Debts

Although these two common types of credit can offer a short-term benefit, use caution when taking on these debts, where payments can easily become unmanageable:

Long-Term Vehicle Financing: Many people finance a vehicle, which is not necessarily a problem – but financing terms are now longer than ever. Even though committing to a five, seven, or even eight-year financing term is becoming more common, consider the risks of doing so:

• Making an unaffordable vehicle ‘affordable’ by stretching out payments over a longer term.
• Investing in an asset that will rapidly depreciate (the exact opposite of a mortgage, where your investment is expected to increase in value).
• Extended car payments can take up a big portion of your household income that could be used for savings, retirement, or even paying off other debts.

Credit Card Balances: Your credit has already been used and now you’re committed to the payments – and the worst part about credit card debt – the high interest that accumulates on often long forgotten purchases.

• If you’re not able to pay your balance in full each month it’s easy for credit card debt to add up over time, and this often happens through frequently overspending, sometimes as a direct result of having insufficient income to meet both your household costs AND debt payments.
• The ‘borrow-repay-borrow’ cycle can be almost impossible to break.
• With an interest rate of 24% (a mid-level rate for most bank and department store cards) your debt will double every three years!
• Making only minimum monthly payments (or slightly more than) means even a relatively small balance can take years to pay off. For example, a $6,000 debt could take 40 years+ to pay off making only your minimum monthly payments and you would pay several times more in interest charges than the actual amount that you originally borrowed.

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Most Risky Consumer Debts

These types of debts can point to an urgent debt problem, either present – or waiting to reveal itself:

Payday or ‘Fast Cash’ Loans: Payday loans are usually a ‘last resort’ type of debt used to meet daily living expenses in a hurry. Because the borrowing fees and interest charges on payday loans are extremely high, using payday loans or ‘fast cash’ advances creates a major risk of kicking off a borrowing cycle that can be even more difficult than credit cards.

• This type of borrowing often leads to people carrying multiple payday loans. It’s not uncommon for people to become trapped in a cycle of payday loans, to have up to a dozen different loans outstanding at the same time.

Canada Revenue Agency Debts: Whether an unpaid balance for income taxes, business GST, or CERB overpayment – an outstanding government debt is not to be taken lightly.

• The government has powerful collection actions at their disposal, and, unlike many other creditors, Canada Revenue Agency can start collection action virtually overnight. You may not learn of pending action until it is already in place, including wage garnishment/seizure, a bank account freeze, or a lien placed on your property.

If you find yourself unable to repay your government debt, or in a situation where collection action is escalating, talk with a Licensed Insolvency Trustee as soon as possible.

Learn More About Solutions for Having Government Debts Forgiven

Consumer Debts to Be Cautious Of

There are two additional types of consumer debt to be cautious of, particularly when it comes to trying to manage debt you already have:

Co-Signing Debt: As Licensed Insolvency Trustees we’re regularly asked when it would be advisable to co-sign a debt for someone else – our answer: almost never!

• Co-signed debts are not a 50/50 liability as many people believe – each person on the account is responsible for 100% of the unpaid debt if the other person does not pay.
• Getting a co-signer when you’re already struggling financially often just introduces additional layers of stress and emotional responsibility – you’ve now given that creditor another responsible party to pursue for payment.
• Conversely, if you’re considering co-signing for someone else, understand that you are potentially letting someone else impact your monthly financial commitments and credit rating.

Read More About Co-Signing Debts

Using Assets as Collateral: Particularly if you are seeking to consolidate debt by borrowing, lenders may require you to pledge to them security over an asset to get a loan.

• Like co-signing, in the event you are unable to meet your repayment terms, your creditor now has additional recourse to collect upon the debt, which could include seizing and forcing the sale of the pledged asset.
• Be especially careful before taking on additional charges against your home equity – you only have so much to borrow against, not to mention potentially leaving yourself vulnerable to an interest rate increase or downturn in the housing market.

Learn More About Options to Consolidate Your Debt

Where to Get Debt Help in BC

If you have concerns about any of your debts or are considering what you can do to manage your debt, reach out to a local Licensed Insolvency Trustee in your province. You can safely get confidential support from a qualified and unbiased professional by contacting a Licensed Insolvency Trustee for a free debt consultation.

Sands & Associates’ team of debt help experts work with people across British Columbia and our full suite of debt help services is available in person from local offices around the province, over the phone, or online – whatever is most comfortable and convenient for you.

Your debt-free future IS possible and may be closer than you think. Connect with a caring, non-judgmental Licensed Insolvency Trustee today – book your free, confidential consultation now.

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