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.

Compare Monthly Payments with Our Debt Options Calculator

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.

The post Risky Consumer Debts – and What to Watch For appeared first on Sands & Associates.

Debt stress can be overwhelming – but you are not alone, we are here to help you find a better way to move forward towards a debt-free future.

Since 1990 Sands & Associates has helped thousands of people across BC get a financial fresh start and a future free from the worry and stress of debt. We are proud to play a non-judgmental and supportive role in helping our clients move forward with their lives and are grateful for those who choose to share their stories, in the hopes that they may offer encouragement and support to someone else facing similar circumstances.

Meet Tammy and watch her tell her debt-free success story, unscripted and in her own words.

Read more about Tammy’s story:

Tammy was managing on a narrow budget as a single Mom raising her son on her own, but when her employer’s company changed hands and she lost her job, debt began to take root in her daily life. After a period of having her income reduced to EI benefits, Tammy did find work, but the decreased income left the strained family finances suffering.

“…starting off at minimum wage again…it hurts because you’re taking such a pay cut…”

“It was very difficult to keep up with payments and bills, my rent especially, that was the hardest one because the rent is so expensive in BC.” As Tammy tried to keep a handle on her finances bill collectors began calling and she was caught in the trap of credit cards and payday loans “…repaying them back to borrow again…”

Battling the relentless demands of her debts, the emotional drain and constant stress and embarrassment left Tammy feeling alone, “I would get two steps ahead and something else would happen and I’d be another three steps back, it felt like I was taking more steps back than I was forward.”

Tammy’s biggest worry was that she wouldn’t be able to care for her son. She describes an incident that triggered her drive for change the most: “…I literally could not buy my son anything for Christmas. That was the worst feeling of my life.”

“I tried my hardest to try to hide it from my son, but he knew something was up because I wasn’t myself….”

Learn the 4 Debt Help Resources Everyone Should Know About

Struggling with feelings of failure, but realizing she was “on a never-ending debt payment system that just didn’t work”, Tammy pushed past the habit of independence that made her shy about asking for help. Despite her nervousness, she sat down with Sands & Associates. “I didn’t feel like I was alone anymore. I had somebody in my corner helping me…” Learning that she could conquer her debt without filing bankruptcy left Tammy feeling energized…and finally stress-free.

“…I just kept taking those steps forward… Life just rolls, and we have to know how to deal with it.”

Connect with a caring Sands & Associates debt expert – book your free debt consultation today.

What kind of debt can a Licensed Insolvency Trustee help with?

Licensed Insolvency Trustees are the one debt professional endorsed and legally empowered by the Canadian federal government to offer solutions that can help individuals manage virtually all types of debts. Whether you choose a Consumer Proposal or even a personal bankruptcy to consolidate and cut debt, working with a Licensed Insolvency Trustee gives you options that can help you deal with debts from:

• Credit cards, overdrafts and lines of credit;
• Payday loans and cash advances;
• Debt consolidation loans from a bank or other financial institution;
• Mortgage or vehicle shortfalls;
• Income tax, GST and other Canada Revenue Agency debts, and their interest and penalties;
• Student loans, whether they are private, federal or provincial;
• ICBC and MSP;
• Personal loans and guarantees;
• Debts incurred while owning your own business.

Tailored to your individual needs and circumstances, a Consumer Proposal can serve to successfully consolidate your debts and cut the amount you need to repay down to what you can afford, with the remaining balance being written-off and forgiven by your creditors – your debts may be reduced by as much as 80% and future interest charges will be stopped permanently.

If you find yourself unable to make any future payments on your debt, a Licensed Insolvency Trustee can also provide bankruptcy services and a personal (or business) bankruptcy can have these debts forgiven.

Meet with a Licensed Insolvency Trustee to find out how we can help you move forward.

Ready to get started? Your debt-free future is waiting. Book your free debt consultation now.

The post Meet Tammy, Hear her Debt-Free Success Story appeared first on Sands & Associates.

• Payday loans are short-term loans offered by privately-owned companies, both online and in-store
• You can borrow up to $1,500 and the loan must be repaid from your next paycheque
• Each province and territory has different rules and restrictions governing payday loans
• In BC, the maximum fee for borrowing a two-week $100 loan is $15, with a maximum penalty of $20 for a bounced payment – these charges are in addition to the interest you will pay
  • The maximum legal interest rate that can be charged in Canada is 60%, but with borrowing fees a two-week payday loan costs the equivalent of being charged an annual percentage rate of nearly 400%
• Once approved your lender may deposit your loan directly into your bank account, other times the loan amount will be available on a prepaid credit card, which you may have to pay to activate and use

Because payday loans come at a much higher cost than a traditional borrowing method, this can make them difficult to pay back – which in turn, often aggravates financial problems.

Although payday loans are intended to be used to help consumers access cash in the event of an unexpected financial need, many people wind up using them to cover day-to-day costs of living. For many Licensed Insolvency Trustees, a client who arrives owing payday loans is generally a sign that immediate debt restructuring is needed in order to solve an escalating debt problem.

Vancouver Licensed Insolvency Trustee Blair Mantin explains: “We don’t usually see people with just a single payday loan, more often than not someone has fallen into a cycle of payday loan use – they’re sometimes borrowing one just to repay the previous. With sky-high interest rates it’s no surprise that this type of financing gets out of hand very quickly. Anyone who has experienced the collection methods for an unpaid payday loan knows just how incredibly stressful this cycle can be.”

Brokerage Agreements for Cash Loans

In addition to payday loan use that has troubled the debt advisor community for years, Mantin and his team have recently begun to see an increase in a new type of ‘easy borrowing’ – cash loans that come via brokerage agreement. Essentially the broker acts as a go-between, matching up the individual seeking credit with a lender willing to provide it – for a big brokerage fee.

Some brokerage companies look deceivingly like the actual lender, so many people may not realize there are two companies to pay until they’re partway through the application process. In addition to paying the brokerage fees, same as the payday loan lender, the broker may also charge flat rates if you miss a payment to them, or even ask for your payment to be postponed.

Here’s an example of the costs of taking a cash loan with a brokerage agreement – these are actual figures taken from a real loan and brokerage agreement in 2016.

For illustrative purposes, we’ll call the person “John” – he needed to borrow $700. John was offered the money he needed by a company we’ll call “ABC Loan”, by using a broker we’ll call “Borrow-Now”:

John gets the $700 he needs from ABC Loan at a maximum yearly interest rate of 32%, thanks to Borrow-Now. He will end up paying:

• $700 to ABC Loan for repayment of the actual amount he needed
• $27.86 to ABC Loan as interest on the money he borrowed
• $2.50 to ABC Loan for fees charged by them to withdraw John’s payments from his bank account
• $325 to Borrow-Now for their flat-rate brokerage fee

John must pay $730.36 to ABC Loan and $325 to Borrow-Now – that’s a total of $1,055.36!

It costs John $355.36 to borrow $700.

Not to mention:

If John had bounced any of his 5 payments to ABC Loan, they would have charged him each time, they would also have charged him each time he asked to postpone one of his payments, for any reason. John would additionally be charged fees by Borrow-Now for missing or postponing any of his brokerage fee payments.

Respondents polled in the 2017 BC Consumer Debt Study conducted by Sands & Associates said that accumulating more debt, and only making minimum debt payments were the top two warning signs that made them realize their debts were becoming a problem.

Are you considering using cash loans to meet your other debt obligations? Have you already found yourself stuck in a cycle of borrowing? There are solutions, payday loans and other debts can be effectively consolidated and cut using a Consumer Proposal, or even personal bankruptcy.

Book your free, confidential debt consultation with a qualified local Sands & Associates representative.

We understand that life can take many turns and we know that it’s difficult to take the first step and ask for support. We’re here to help you understand your options for dealing with debt so you can make the best choice for your specific situation and get a financial fresh start.

The post Risky and Riskier – Understanding Payday and Brokered Cash Loans appeared first on Sands & Associates.