If you’ve been turned down for a consolidation loan you may feel discouraged and as though you don’t have any other options, but there’s good news – what many Canadians don’t know is that it is possible to consolidate your debt without borrowing. Read on to learn about some common reasons individuals are denied consolidation financing, and what you can do instead.

Why Debt Consolidation is Helpful in Paying Off Debt 

Often people who want to consolidate their debt are looking to get a handle on a financial situation that may be getting stressful or overwhelming, and gain better control over growing balances and payments. There are usually several benefits people try to achieve in consolidating their debts, such as:

• Making one monthly payment to cover all debt instead of trying to manage multiple payments.
• Having a clear plan to pay off debt rather than making inconsistent payments.
• Getting a lower interest rate on the balance owing, reducing the overall cost of carrying debt.

Debt consolidation with a lender means you’re taking out a new loan, not just changing an existing debt, and this means you must meet the lender’s qualifiers. Many consumers first turn to their bank or another lender when they want to consolidate their debt, and, as many discover, getting a consolidation loan can be a lot more difficult than they thought.

Reasons You Might be Denied a Consolidation Loan 

There can be several reasons you might have an application for credit rejected by a lender, and while not all lenders will have the same checks and qualifiers in place, here are some of the common reasons why you might not be able to get a consolidation loan (or other financing):

1. You have a low credit score due to a credit history that shows difficulty maintaining your payments, or a lack of credit history.

Your credit score is an ever-changing number ranging from 300 (low) to 900 (high). To get a consolidation loan with good terms, borrowers generally want you to have a credit score in at least the mid-600’s. Higher scores can qualify for you for ‘best terms’; less than this and you might only qualify for borrowing with a sub-prime lender, which typically comes at a higher cost.

2. You don’t have a major asset to use as security against your loan.

A lender may deny you a consolidation loan if you don’t have a significant asset such as home equity or a vehicle to pledge as collateral for the loan. Lenders will often ask to have an asset as security for borrowing so they have additional means to recover their money – if you stop paying they can seize and sell the asset.

Lenders may also ask you to bring in a co-signer to back up your loan. Much like using an asset as collateral, this gives your creditor other avenues to collect their debt, but carries significant financial risks to your co-signer, not to mention any relationship risks, if you have difficulty making your payments.

What You Should Know About Co-Signing Debts

3. Your income is deemed too low or inconsistent to meet the lender’s threshold.

Lenders want to be assured that you can afford to repay your loan within the amortization period and, from their perspective, the higher your payments are compared to your income, the riskier it becomes that you’ll default on your loan. This can be particularly problematic if you have a lot of debt, have seasonal or part-time income, are self-employed, or lack employment history.

4. Your debt load is too high to qualify for borrowing.

If your debts are high in comparison to your income lenders are likely to deny you a consolidation loan. Lenders may interpret a lot of debt as symptomatic of you having issues controlling spending or they may consider your debt-to-income ratio simply too unbalanced for you to be able to reliably repay a new loan.

How Much Debt is Too Much?

What Are the Alternatives to a Consolidation Loan?

Fortunately, borrowing isn’t the only way to consolidate your debt to get relief from accumulating interest and never-ending payments. In Canada consumers have a few options to consider that can serve to streamline multiple payments, ease interest charges and relieve pressure on your monthly budget.

Consumer Proposals – Consolidate and Cut Debt (up to 80%)

A Consumer Proposal is a unique option in Canadian law and is one of the best ways to consolidate – and cut – your debt, without borrowing, interest, or added fees. This is a legal debt consolidation solution you can access only through working with a Licensed Insolvency Trustee.

• A Consumer Proposal can be used to consolidate virtually all types of debt – credit cards, payday loans, lines of credit, government debts such as income tax balances, business GST, CERB overpayments and more.
• You’ll offer to repay your creditors the portion of your balance you can reasonably afford to pay over a period of up to five years, and they will agree to forgive the rest. It’s not uncommon in a Consumer Proposal for debts to be cut by up to 50-80%.
• Your debts are frozen and because there is no borrowing needed, there are no interest charges.
• A Consumer Proposal will stop interest charges as well as collection actions, even government wage garnishments or bank account freezes.
• The administrative costs for your Licensed Insolvency Trustee are calculated by government-set tariff and are paid from the funds your creditors receive – there is no added or out-of-pocket cost for you – you simply pay what you’re offering your creditors.

A Licensed Insolvency Trustee can talk with you about your situation and whether a Consumer Proposal is your best option. For many people a Consumer Proposal is the ideal solution, allowing you to repay what is affordable and giving you a clear debt-free date.

Credit Counselling – Repay 100% of Your Debt

These informal debt repayment plans are coordinated by a credit counsellor who will try to negotiate an interest reduction or freeze with your eligible creditors, and you’ll make your consolidated monthly payment to the credit counsellor.

• Credit counselling doesn’t reduce your debt and can only consolidate basic debts.
• Because you’re not reducing your debt and will pay a fee to the credit counsellor on top of what you pay to your creditors, credit counselling plans can have high monthly payments, making them an unaffordable and unreliable option in many cases.

Unqualified Debt Advisors – What Consumers Need to Know

Can I Afford a Consolidation Loan? 

It’s important to understand that if you’re considering a consolidation loan or have been turned down for one, your debts may have already reached a point where simply combining them into one new loan is not going to be a significant enough solution to allow you to get out of debt without considerable cost or time.

• If you add up all your debts, divide this number by 60 and couldn’t afford the resulting number as a realistic monthly payment, this is a very simple way to know that a consolidation loan would likely only delay a later cash-crunch and prolong debt-stress you may be experiencing.

If you think you have a debt problem, are worried about managing your debts, or want to find a better way to pay off your debt within five years, the best thing to do is talk with a Licensed Insolvency Trustee to get qualified expert advice about your situation and all your options.

Get Help with Debt Consolidation – Talk with a Licensed Insolvency Trustee About

Licensed Insolvency Trustees are Canada’s only designated debt help professionals, and we are the only experts qualified to offer debt advice to consumers, including solutions that can help you get forgiveness for virtually all types of debts.

• If you live in BC you can talk with a Licensed Insolvency Trustee from Sands & Associates, we serve the entire province from local offices and you can also access our full suite of debt help services over the phone or online – whatever is most comfortable and convenient for you.

When you need guidance on dealing with debt, a Licensed Insolvency Trustee is your best resource, and all Licensed Insolvency Trustees should offer you a free, confidential debt consultation. This is your opportunity to get specific advice about your unique situation and explore all your options, including debt consolidation financing, Consumer Proposals, credit counselling plans and more.

• We’ll spend the time to understand your concerns, needs, and goals and at the end of your consultation you should have all the information you need to make an informed decision about how you want to move forward – and a clear outline of your next steps.
• You don’t need any to get a referral to talk with a Trustee, and there are no qualifiers for you to meet. Just reach out to a Licensed Insolvency Trustee local to your province directly.

You owe it to yourself to get debt help, and we’re here to support you. No judgment, just solutions!

Talk with a non-judgmental debt help expert at Sands & Associates to get a debt-free plan that works for you, and move forward with your life.

The post Turned Down for a Consolidation Loan? Here’s What You Can Do 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.

How To Consolidate Your Debt

Debt consolidation works by combining multiple different debts that you have into one new balance, and consolidating your debt can be a strategy to consider if you want to:

• Simplify your monthly payments.
• Reduce your interest charges and/or monthly payments.
• Establish a clear repayment schedule.
• Pay down your debt faster.

There are different ways to do debt consolidation. If you’re working with a lender, you could potentially consolidate your debt through a borrowing option such as:

• A new loan that’s used to pay off your existing debts, which you’ll repay over a set term.
• A balance transfer where you move your credit card balances onto one new credit card account, and you’ll manage your own monthly payments to pay off the new total.
• A new personal line of credit, which you’ll pay back through payments you manage.
• A new home equity line of credit or second mortgage, where you may make set payments to pay the balance off – or make minimum interest-only payments.

A Better Way to Consolidate Your Debt

Although you might consider options through a lender, consumers do have an alternative consolidation option that requires no further borrowing – this is called a Consumer Proposal. Here’s how it works:

• A Consumer Proposal will consolidate virtually all your debts (including general consumer debts, personal debts, and government debts) into one repayment plan, and you’ll offer your creditors the portion of your debt you can afford to pay back over a period of up to five years.
  • Your balances will automatically be frozen, and no further interest charges will be added.
  • Your creditors will agree to forgive the unpaid balance (which can often reduce your total debt anywhere from 50-80% or more).
  • You’ll work with a Licensed Insolvency Trustee who will deal with communications with your creditors, collect and distribute your payments, and manage the whole Consumer Proposal.

Learn More About How Much Debt a Consumer Proposal Can Eliminate

What Are the Benefits of Debt Consolidation?

Because there are borrowing and non-borrowing options for debt consolidation, the potential benefits to consolidating your debt will ultimately depend on the type of debt consolidation you choose.

If you’re using a lender to consolidate your debt with a loan or similar option, aim for a financial agreement that offers you advantages that include:

• One simple affordable monthly payment that is smaller than your current monthly payments combined, making your finances easier to manage.
• Paying back your consolidated debt at a lower interest rate than you currently have, and with a repayment term short enough that you’ll save money on the total cost to repay your debt.
• A debt repayment schedule that allows you to clearly plan for when your debt will be paid off.

Added Benefits of Choosing a Consumer Proposal for Debt Consolidation

If you decide to make a Consumer Proposal you could get even more advantages from your debt consolidation, in addition to the benefits of a consolidation loan, including:

• A flexible and customized monthly payment, or other payment terms.
• Paying back only an affordable portion, often as little as 20-50%, of your total debt, in full settlement of your account balances.
  • Because most people cut their debt AND don’t pay new interest charges, monthly Consumer Proposal payments are almost always substantially lower than those of consolidation loans.
• Professional support throughout the process, including financial counselling services are all available to you at no added cost or fee.
• Creditors will be directed to communicate with your Licensed Insolvency Trustee, removing stress or anxiety you may have about speaking with creditors.
• With no upfront cost to get started with a Consumer Proposal you’ll notice an immediate improvement in / boost to your monthly budget and personal finances.

Learn More About Why Borrowing Isn’t Always Best for Consolidating Debt

What Are the Downsides of Debt Consolidation?

If you are considering consolidating your debt by borrowing with a lender, there are several possible ‘cons’ to be aware of, including:

• Qualifying for bank-based debt consolidation can be difficult – both in terms being approved to borrow at all, and for borrowing at ‘best’ rates.
  • Lenders may require you to have a co-signer who will be responsible for repaying the full unpaid balance if you default on your payments, or they may require you to use a major asset as collateral against your loan. Both types of ‘guarantees’ can be highly risky, especially if you’re already struggling to pay down your debts.
  • You may not be able to borrow enough to cover all your existing debts, which can mean still having to manage multiple debt payments and accounts.
  • Long repayment terms can end up costing you more in accrued interest, and there can be even more borrowing costs and fees if you work with a ‘subprime’ lender.
  • If you borrow at a variable interest rate, you’ll be immediately impacted by Bank of Canada interest rate hikes.
• You may find yourself stuck in a borrow-repay-borrow cycle if you don’t stop using your credit.
  • If there are underlying financial issues that you haven’t addressed and you still have access to use your credit accounts, you may end up dealing with an unmanageable debt load again very quickly!
  • Using a line of credit or credit card balance transfer to consolidate your debt can be risky if you’re not able to strictly manage (or afford) your debt payments, since as you pay back your balances the credit will again be available to be used.

Avoid the temptation to borrow more than you need to consolidate your existing debts – and consider closing the accounts you’re paying off, so you’re not tempted to use them.

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

Avoid Possible ‘Cons’ of Debt Consolidation with a Consumer Proposal

One way to safely avoid many of the potential downsides of debt consolidation is by using a Consumer Proposal to consolidate your debt, rather than relying on refinancing. With a Consumer Proposal:

• You’re not borrowing or paying any interest while you pay off your debt (which will be reduced too).
• Your credit score and history are not qualifying factors.
• You retain control and possession of your assets and don’t need a co-signer.
• You can start fresh and get a new credit card to keep the convenience, but ensure the limit is low enough that it won’t become unmanageable – or better yet, consider a secured or prepaid card!
• You have a clear plan tailored to your situation, and your Consumer Proposal payments won’t go past 60 months.
• Your creditors cannot change their minds, opt-out, or change the terms once your Consumer Proposal has been agreed to.
• You can pay off your Consumer Proposal early at any time, without penalty.

Can I Afford Debt Consolidation?

It’s very important to make sure you can manage the monthly payments required to effectively pay off your debt consolidation. Understand that a lender being willing to grant you credit doesn’t mean you can truly afford it…

As a quick check, try the ‘Rule of 60’ math:

• Add up your total (unsecured) debts and divide that total by 60.
• Is the resulting number a monthly payment you can consistently afford, to pay off your debts in the next 60 months (five years)?

If the affordability is doubtful – or you simply want to make your monthly payment lower – again, consider a Consumer Proposal as an ideal debt consolidation option. The difference in monthly payments and interest savings over the time it takes you to pay off your debt can be substantial.

Debt Consolidation Loan Payments VS Consumer Proposal Payments

Here’s an example to compare the difference of consolidating your debt with a consolidation loan versus consolidating and cutting your debt with a Consumer Proposal:

• To pay off a $20,000 debt consolidation loan in five years with a 12% interest rate, you would need to pay $445 per month – and your total interest costs would be roughly $6,700 over the five-year term.
• If you instead made a Consumer Proposal that offered to repay 30% of your total debt ($20,000 cut down to $6,000) over a period of 60 months (five years), that would require you to pay $100 per month – with no added interest costs or professional fees.

Learn Why Being Debt-Free Should (Almost) Always Be a Top Financial Priority

President of Sands & Associates, BC Licensed Insolvency Trustee Blair Mantin, explains the ins and outs of debt consolidation.

Get Help Assessing Debt Consolidation and Other Options

Whether you’re interested in how you can consolidate your debt, experiencing problems making your monthly payments, or hoping to get a plan to pay off your debt for good – the best thing to do is connect with a Licensed Insolvency Trustee local to your community so you can assess your situation together with a trusted professional.

• Licensed Insolvency Trustees are Canada’s only designated debt help professionals, fully qualified to safely provide you professional advice about your debt and debt solutions available to Canadians.
• All Licensed Insolvency Trustees offer a free one-hour consultation, and there is no referral necessary to connect – simply reach out directly.

Sands & Associates serves all of BC and can offer you our full suite of debt help and supportive services online, over the phone, or in person at the local office nearest you. When you speak with one of our debt help experts you can expect that:

• You will be treated with respect and dignity.
• We will take time to understand your unique situation, your concerns, goals, and needs.
• You’ll be provided information about all your options to deal with your debt, from consolidation to Consumer Proposals, bankruptcy to credit counselling and more.

It is our goal that by the end of your consultation you’ll come away confident, with a better understanding of your situation and options, with clear next steps in the debt solution you choose.

We understand it might feel uncomfortable to talk about your debt and financial challenges you might be experiencing, but please know that we are not here to judge you, your circumstances, or what has brought you to us. You owe it to yourself to get debt help, and we’re here for you with support and solutions that work. You could have your debt paid off years sooner than you think!

Get non-judgmental debt advice and a plan to be debt-free. Book your free, confidential debt consultation today.

The post Is Debt Consolidation Good or Bad? Understand the Pros and Cons of Debt Consolidation appeared first on Sands & Associates.

Strategies to Pay Off Debt

Debt payments can be a big demand on household income, and this is a key reason why paying off debt is a high-priority financial goal for many consumers. Everyone’s personal situation and needs are unique when it comes to ‘how best’ to deal with debt though, and it’s important to remember that the types of debt, balances, and personal circumstances you have will greatly impact the pros and cons of your options.

If you are looking for ways to pay off your debt, you might consider some of the following strategies.

Do-It-Yourself Debt Payment Plans: If you don’t have a lot of debt or other demands on your finances, you may be able to clear your debt with a self-directed plan and some careful budgeting.

• After listing all your debts, you may choose to prioritize paying off certain debts first based on factors such as debts with the highest interest rates, or debts with the lowest balances.
  • You might also benefit from contacting your creditors to try to negotiate lower interest rates on your debts.

Keep in mind that if it would take you longer than five years to pay off your debt, you may find yourself paying a lot in interest over time – and if you don’t have enough money in your budget to accumulate savings at the same time you’re paying off your debt, you’ll be especially vulnerable to unplanned costs setting you back.

Compare Your Debt Options

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

Refinancing Your Debt: You may be able to save some money on interest costs by combining eligible debt balances into a line of credit, consolidation loan or even a ‘balance transfer’ to a different credit card with a lower interest rate.

• This type of debt solution doesn’t come with any special benefit besides repaying your debt at a lower interest rate – you’ll still repay all your debts in full, with a bank collecting interest and other financing fees for lending you the money to pay off your other creditors.
  • You’ll likely need to leverage equity in a major asset or rely on a relationship with a family member or friend willing to co-sign for you to use this type of solution, both of which can be highly risky.

Debt Repayment with a Credit Counselling Program: If you have only a few basic consumer debts with low balances, a debt repayment plan offered by a credit counsellor may allow you to repay your debts in full without ongoing interest charges.

• Credit counselling plans don’t cut balances, they just (usually) freeze future interest charges.
• Always confirm whether you have any debts that would need to be paid separately to the credit counselling payments.
  • Any government creditors (such as Canada Revenue Agency for example) will not accept credit counselling program payments and will continue to charge interest and pursue you for payment.
• Make sure the amount you will save in interest costs is greater than the credit counsellor’s fees. Even non-profit credit counselling plans cost money!

Solutions to Pay Off Your Debt Faster

When it comes to ways to reduce, settle, cancel or forgive your debts, there are a few potential options to do this, though it is very important to understand that in Canada the only way to safely, legally cut your debt is by working with a Licensed Insolvency Trustee.

• Licensed Insolvency Trustees are Canada’s only federally-regulated debt help professionals, specifically trained, and certified to provide consumers debt advice and debt management services.

Making a Consumer Proposal

(Only available through working with a Licensed Insolvency Trustee)

If your total (non-mortgage) debts are under $250,000, a Consumer Proposal could be an ideal choice to consolidate and cut your debt.

Consumer Proposals are one of the most popular solutions offered by Licensed Insolvency Trustees and can provide you significant advantages in managing debt, including:

• Consolidated debts are frozen, and there are no added interest costs.
• Debts are often cut by up to 50-80%.
• Your credit history is not a qualifying factor.
• Your creditors will be bound by the accepted Consumer Proposal and cannot change their minds, nor pursue you for collections, wage garnishments, etc.
• You can pay off your Consumer Proposal early at any time without penalty.
• There are no added professional fees added in or on top of your debt payments.
• A Licensed Insolvency Trustee will work with you throughout the process, and handle communication with your creditors.
  • A Consumer Proposal can ONLY be filed by working with a Licensed Insolvency Trustee. Don’t be fooled by ads for services that sound similar but are offered by a credit counsellor, debt consultant, or debt settlement agency.

Consolidating Debt with a Consumer Proposal: Step-by-Step

Negotiating Debt Settlement

(May be able to do on your own, or with a debt consultant)

If you have cash on hand, you may try to negotiate with your creditors, offering them a lump sum of money to settle your debt for less than the total balance you owe. Some people also try to work with a debt consultant for this type of debt reduction service.

• Extreme caution should be used with any debt settlement company. Not only will you be charged fees for these services (or even unnecessary services or referrals), but some also employ high-pressure sales tactics, make unrealistic promises, and encourage strategies that can aggravate your situation with your creditors.
  • For example: You might be told to stop making your debt payments so you can instead save up money to accumulate a lump sum settlement to be offered to your creditors. In the meantime, you have no protection from creditors, who might start collection or legal action against you due to their debts going unpaid.
• Review any contracts or agreements carefully before signing, and never send money before researching the company.

Filing for Bankruptcy

(Must be administered by a Licensed Insolvency Trustee)

If your situation is such that you have very minimal income, or other extenuating circumstances that make any sort of debt repayment a hardship, you may want to explore whether bankruptcy could be the best option to forgive your total debts.

Although many people are anxious about the idea of declaring bankruptcy, or fearful they will not be able to recover financially, the reality is that personal bankruptcy is a relatively straightforward and private legal process that offers debt relief and a financial fresh start.

• Filing bankruptcy will immediately trigger a freeze for your creditors and in as little as nine months you can be discharged (released) from bankruptcy with all your debts forgiven, allowing you to move forward with your life.

Is Personal Bankruptcy Right for Me?

Getting Debt Advice

Most people don’t know what resources they have available for support in managing their debt, and this often means people have a series of trials and errors before a debt repayment plan that gives them good results. Unfortunately, these false starts or unsuccessful attempts to manage debt can be not only discouraging, but also come at a cost to finances, time, and personal wellbeing.

If you’re dealing with anything debt-related, a Licensed Insolvency Trustee is the most appropriate resource to seek out and should be your first contact.

You don’t have to navigate the complexities of managing debt alone or pay money to get complete information and qualified advice from an expert. In an hour’s free consultation a Licensed Insolvency Trustee can help you fully understand your situation and all your options.

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Review Us

– Jayvee Lester De Castro

I highly recommend Sands and Associates especially Jennifer Thom. If you have problem with you debt. She will give you the best options and support throughout the process. – Jayvee Lester De Castro – 1 day ago 

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– Jarrod Barratt

I’ve been having financial hardship for quite some time now and I am pleased I reached out to Sands & Associates recently. They were very quick to get started on helping me with relief and I never once felt judged in the process. Omer and Jennifer were very polite and informative in the process and I thank you very much for your help and support. I would recommend Sands & Associates to anybody looking for some flexibility in their financial struggles. – Jarrod Barratt – 2 days ago 

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– All the good things

I found Jennifer Thom to be very helpful and friendly going over my options to get my debt dealt with. I felt welcomed without judgment and she made my stress and anxiety lessen which was huge for me. Thank you for your help and I look forward to a new future where I can be in control and not worried about how I’m going to survive debt. All the best. Will recommend. – All the good things – 2 days ago 

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– Saba N.

Sandra was amazing from start to finish with my consumer proposal. From answering questions and getting back to me in a timely manner when I knew she was very busy, the process was quick and painless. Paying this off will be great and then I can build up my credit again! Thanks again, Sandra ♥️ – Saba N. – 2 days ago 

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– Ali D

I went to Sands & Associates because I was overwhelmed with my debt and had no idea what to do. Camille helped me set up my consumer proposal, and honestly, she made the whole process so much easier than I expected.

She explained everything clearly — what a consumer proposal is, how it works, what my monthly payment would look like, and what debts would be included. She never made me feel embarrassed or judged, just supported.

Because of her, I finally feel like I have control over my finances again. She walked me through every step, answered all my questions, and made sure I fully understood what I was signing up for. I’m so relieved and grateful.

If you’re thinking about a consumer proposal or just don’t know where to start with your debt, talk to Camille. She’s patient, caring, and really knows what she’s doing. Highly recommend! 🙌 – Ali D – 2 days ago 

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– Shubham Batra

I had an exceptional experience with Sands & Associates during one of the most stressful periods of my life. I was overwhelmed, anxious, and unsure of where to turn, but the team treated me with genuine care and understanding from the very first moment.

Helen was absolutely amazing, patient, compassionate, and incredibly knowledgeable. She made everything easy to understand and helped me feel supported at every step. Hashan was also extremely helpful and kind, always quick to respond and guiding me with professionalism and empathy.

Thanks to both of them, I finally felt relief and clarity during a really difficult time. I’m truly grateful for their support and highly recommend Sands & Associates to anyone who needs trustworthy help and real compassion. – Shubham Batra – 2 days ago 

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– Emilee Stonehouse

I am very happy I got to work with Sand & Associates. It has been making life so much easy dealing with the debt I had. Plus working with Dana, and everyone there has been a delight to move things forward and easier. Thank you Sands & Associates! – Emilee Stonehouse – 3 days ago 

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– ga wa

Great and quick communication
Selina helped me with my case.
Was so stressed, quick responses from her helped me calm down.
Thank you so much Selina
You are awesome – ga wa – 4 days ago 

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– Jenna Sullivan

Working with Carolyn was an absolute relief. From our very first conversation, she made what could have been a stressful situation feel manageable and even hopeful. She explained everything clearly, answered all my questions with patience and understanding, and made sure I felt supported every step of the way. Her professionalism and compassion made a huge difference, and I’m incredibly grateful for her help. I would highly recommend Carolyn and Sands & Associates to anyone who needs guidance and wants to feel truly cared for through the process. – Jenna Sullivan – 4 days ago 

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– Deep Brar

I can’t thank Sands & Associates enough, especially Jagdip Dial, for helping me through one of the most stressful times in my life. I was buried under debt and didn’t know where to turn, but Jagdip treated me with genuine kindness and respect from day one.

He walked me through every detail of the consumer proposal process, explained everything clearly, and never once made me feel judged. Because of his patience and guidance, I finally feel like I can breathe again and start rebuilding my life with confidence.

If you’re struggling with debt and feeling hopeless, please reach out to Jagdip and the team — they truly care, and they’ll help you find a way forward. – Deep Brar – 4 days ago 

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Should I Get Professional Debt Help?

If you feel like you might have a debt problem – you’re probably right! It’s best to connect with a Licensed Insolvency Trustee as early as possible, doing so can save you a lot of frustration (and money). Although we do help people facing urgent situations such as wage garnishments and legal action, we also offer professional advice, guidance – and debt-free plans – to people who feel stuck in a debt cycle, or may be facing debt warning signs such as these:

• Struggling to pay your debt off even though you make regular payments.
• Continually relying on your credit to meet costs of living and financial commitments.
• A debt repayment plan that’s going to take longer than five years.
• Feeling generally stressed, anxious or worried about your debt.

Every consumer should know that they have the right to connect directly with a local Licensed Insolvency Trustee in their province:

• You do not need a referral to speak with a Licensed Insolvency Trustee, and BC residents can book a free, confidential consultation with a local Sands & Associates Licensed Insolvency Trustee.
  • All our services are available in person, over the phone, or online.
• You are under no obligation to continue working together, and there is no impact to your credit history, and no hidden fees.

Get non-judgmental advice on dealing with debt – and solutions that work. Book your free confidential consultation with a caring local expert today.

The post What Can I Do to Pay Off my Debt? appeared first on Sands & Associates.

There’s a lot to consider when you are deciding who best to help you with your debt. This decision is of course on top of any financial stress you’re coping with, and hesitations you might have in talking openly about your financial situation to someone who is essentially a stranger. Before speaking with any credit counsellors or debt agents, you should understand the main differences in debt services, and key questions to ask before proceeding with any debt management or restructuring plans.

Types of Debt Help Professionals in Canada

Although credit counselling and similar services may be offered under many different names, here’s an overview of the main three types of professionals offering debt help to consumers in Canada: 

Licensed Insolvency Trustees

Licensed Insolvency Trustees are Canada’s only federally regulated debt help professionals, fully qualified and endorsed to provide debt advice and services to consumers.

• A Licensed Insolvency Trustee can provide you unbiased help in understanding and weighing a full range of options to deal with your debt, work with you on specialized legal debt solutions, and manage communications with virtually all creditors on your behalf. 

Credit Counsellors

In Canada credit counselling agencies may be private companies or non-profit organizations. Legally there is no specific training or education required to call yourself a credit counsellor or perform credit counselling services.

• Credit counsellors typically offer debt services such as: informal plans or programs where, for a fee, you can get help managing eligible debts, private financial coaching, resources around budgeting and managing your money. 

Debt Consultants

Debt consultants operate under many different titles in Canada and may work as individual agents or part of a for-profit company. Like credit counsellors, they are not legally required to have any specific training or qualifications.

• The main service most debt consultants offer is to negotiate a lump-sum payment to settle your individual debts for less than you owe. If you’re willing to pay their fees they may offer this service (which may be called debt settlement, debt pooling or similar) with eligible creditors.

Questions to Ask Your Credit Counsellor About Their Services and Plans

Asking the following key questions will help you better understand how any debt repayment plan you’re considering will work for you and your specific situation. Particularly when it comes to informal options such as credit counselling and debt pooling, many people find that with the limitations and uncertainties of these services, they don’t meet all their needs.

1. What Training or Licensing Do They Have?

You want to be sure that any advice you receive is from someone knowledgeable about Canadian credit and debt.

Since only Licensed Insolvency Trustees hold an official government-qualified designation as debt help professionals, any training and certification credit counsellors or debt consultants have will be through self-regulated organizations which may vary significantly in quality and rigor. In addition, since there are no legally required training programs, many people operating as credit counsellors or debt consultants may not have any formal training at all!

At minimum you should ensure that anyone you consider working with has:

• A good standing with a legitimate provincial or national credit counselling association.
• Registered with Consumer Protection BC.
  • Anyone who charges a fee to act for or represent you to your creditors must be licensed with Consumer Protection BC.
  • Licensed Insolvency Trustees are exempt from this requirement because they hold a specific, Federally regulated, legal standing and designation.

2. How Will They Be Paid for Their Credit Counselling (or Other) Services?

It should never cost you money to discuss your debt options or have a consultation, but there will be costs if you decide to go forward with any type of financial restructuring plan.

Always be clear on what your monthly payments will get you, what out-of-pocket costs you will be charged, and whether you are expected to pay upfront fees before any work will be done on your behalf. Here are a few examples of the different types of payments you could encounter:

• With some credit counsellors you will be expected to pay for monthly monitoring, consulting fees and other levies in addition to what you are expected to pay for the debt repayment amount.
  • Not-for-profit credit counsellors charge administrative fees when you use their repayment programs, on top of what you pay to your creditors.
  • In addition to charging you administration fees, some credit counsellors also get a percentage of the debt they recover paid to them by your creditors.
• In a debt repayment plan lasting 90 days or more, a debt consultant in BC may charge fees as much as 15% of the gross debt amount you are repaying, plus a one-time charge equal to the average monthly payment being made to an individual creditor.
  • Many debt consultants also tack on additional referral and consulting fees.
• Working with a Licensed Insolvency Trustee, in a Consumer Proposal all administration costs are included, so the payment amount you offer to your creditors is all you pay.

How Much Debt Will a Consumer Proposal Eliminate? Learn More

3. Will Creditors Work with Them?

Before committing to any plan or repayment program, be sure it will cover all the debts for which you need help. For example, government debts including income tax debt, student loans, or CERB overpayments can only be managed (and reduced, or forgiven completely) by working with a Licensed Insolvency Trustee.

It’s also important to find out what will happen if any creditors are not in agreement with the repayment plan you propose. Here are some key differences to consider:

• In a Consumer Proposal, acceptance by 50% (by dollar value) of your creditors means that all creditors are bound to your offer, and you are legally protected. Once accepted by this simple majority of your debts, creditors cannot change their mind or choose not to participate.
• With a credit counselling plan, you must separately repay creditors who do not agree to (or are ineligible for) your plan.
• A creditor who doesn’t accept a debt settlement offer through a debt consultant will need to be repaid in full, and you may still be asked to pay the consultant’s fees even if they weren’t able to successfully make a deal on your behalf.

4. What Can You Do if You Have a Dispute? 

Many people find out too late that there are few measures to keep debt consultants and credit counsellors in check. With debt repayment agents there is no federal regulatory body, no complaints or dispute processes, but there are some provincial regulations in BC that provide basic standards for licensing conditions and fee guidelines.

• BC’s debt collection and repayment regulation requires that collectors and debt repayment agents have a license to conduct business in BC, and Consumer Protection BC oversees this licensing.
• Most consumers have little recourse if there is a dispute; however, and if you choose to work with an agent outside the province (or outside Canada), you may have virtually no resources to appeal to.

Licensed Insolvency Trustees though, are overseen and regulated by the Federal Government, and there are built-in safeguards for consumers at the highest levels possible.

• The Office of the Superintendent of Bankruptcy (part of Industry Canada) is the government branch in charge of qualifying and overseeing Licensed Insolvency Trustees, and there are procedures in place for regular compliance checks, and addressing dispute or requests for mediation.

There are many factors to consider when it comes to credit counselling solutions, and these are only a few of the questions you may need to ask. You should only move forward once you have a clear, confident understanding of your options.

Learn About Your Options for Debt Forgiveness in Canada

What You Should Ask Yourself About Credit Counselling and Other Debt Solutions 

It’s important to keep your specific situation and needs in mind, so before you sign consider:

• Will I be saving money once I add in the fees and/or program costs?
• Which of my debts will this solution cover?
• Do I need (or want) protection from any of my creditors?
• Can I consistently afford the required monthly payments?
• What do I have to do throughout the process?
• Do I fully understand all the ins and outs?
• Am I feeling pressured or “sold” something that I am uncomfortable with?

Sands & Associates works with consumers across BC, and we pride ourselves on our empathetic and non-judgmental approach to helping people, understanding that in addition to the financial strains, there are many emotional layers to dealing with a debt problem.

Learn about your options and choose the debt-free plan that’s right for you. Get started with a free, confidential debt consultation – telephone, online and in-person services are available across BC.

The post 4 Questions to Ask When Choosing a Credit Counsellor appeared first on Sands & Associates.

How Can Consolidation Help Me Manage Debt?

If you’re dealing with multiple debts, there can be good reason to manage your repayment with debt consolidation. Depending on the solution you choose, debt consolidation benefits may include:

• Organizing several different debt payments into one simple monthly payment
• Taking the guesswork out of calculating monthly payment amounts
• Lowering your total monthly debt payment
• Discounting the cost of borrowing by reducing (or eliminating) the interest charges on your debt
• Cutting the amount of debt you must pay back to settle your accounts in full
• Setting a clear schedule for when you can expect to have your debts paid off

It’s important to understand the options and choose the debt consolidation option that’s right for you.

Top Choice for Debt Consolidation – Consumer Proposals

With few qualifiers and no borrowing costs or added fees, a Consumer Proposal is one of the best ways to consolidate debt. A Consumer Proposal allows you to consolidate and cut virtually all debts (including tax and other government debts), repaying the portion you can afford with a simple monthly payment.

Try the ‘Rule of 60’ Math: Add up your total non-mortgage debts and divide by 60. The result gives you a no-interest monthly debt payment for the next 60 months (five years). Now what if you could take that payment and cut it by 50% – or even up to 80%?

That type of interest-free debt reduction is possible with a Consumer Proposal debt consolidation, a flexible legal option that can be tailored to suit just about every situation. You’ll offer to repay the amount of debt you can afford, and your creditors will agree to write-off the unpaid balance in full settlement of your accounts.

• There is no borrowing for a Consumer Proposal, eliminating the need for a credit check qualifier.
• In addition to reducing your balances, you’ll ‘freeze’ your debt, eliminating ongoing interest charges, and have a legal safeguard to protect yourself from creditors.
  • You can even stop actions like a wage garnishment or bank account seizure.
• A Licensed Insolvency Trustee will deal with your creditors on your behalf and work with you throughout your Consumer Proposal.
• No service fees are added to your monthly payments (Trustees have tariff-based fees paid from the money your creditors get).
• You’ll have up to 60 months to complete your Consumer Proposal and have the option to pay it off early any time without penalty.

Consumer Proposals offer a unique alternative to bank loans, allowing you to consolidate your debt with substantially less cost, and avoid debt repayment turning into a long-term expense.

Is a Consumer Proposal Right for Me? Learn More

Consolidation Loans and Financing Options – Pros and Cons to Consider

If you’re investigating how to consolidate your debt with a bank or other lender you might consider one of these borrowing options:

• A basic personal loan to pay off multiple balances and roll your debt into one new loan with a fixed payment schedule.
• A line of credit used to cover different debts that you’ll repay over time (with a minimum monthly payment required to keep the account up to date).
• A home equity loan or line of credit that functions like a second mortgage.

Bank-based debt consolidation products do not reduce your total debt but may offer some convenience if:

• Your new payment and payment terms are affordable and free up room in your budget each month
• The new interest rate is lower than the rate(s) you’ve been paying on your various debts

There are drawbacks to be aware of though when it comes to using more credit as a debt solution…

1. The cost of borrowing matters! Understand that with loans and financing options:

• If your loan or line of credit has a variable interest rate, your monthly payments will go up as interest rates increase.
• The longer the borrowing term, the more your debt will cost you. Some people get stuck between a rock and a hard place choosing between a longer term that has lower monthly payments and a shorter term (less interest costs) with higher monthly payments.

2. Successfully paying off consolidation financing can be challenging:

• If you consolidate with a product that has a flexible repayment schedule you need to ensure you are paying down your balance. If you don’t have the budget or discipline to pay substantially more than minimum monthly payments on a line of credit you may stall and then rack up interest charges.
• Don’t take on financing that you can’t afford, and don’t be tempted to incur more credit than you need or to keep using other credit accounts. Any of these just lead you further into debt.

Expert Tips to Pay Down Credit Card Debt Faster – Learn More

3. Consolidation loans at ‘best rates’ are often difficult (if not impossible) to qualify for:

• If you do qualify, you’ll likely still be asked to offer a major asset as collateral or bring in a co-signer. Both mean you are taking a significant risk if you have any difficulty keeping up with payments.
• It’s not uncommon for people to discover that even with a good credit score, the amount of debt they have makes them ineligible for consolidation financing through mainstream lenders.

If you don’t qualify for a consolidation loan at ‘best rates’ or are concerned about being able to afford the payments, you still have non-borrowing consolidation options to consider. Remember, a Consumer Proposal does not require any borrowing, and your credit history is not a qualifying factor.

Denied for a Debt Consolidation Loan?

Sometimes after being turned down for a consolidation loan with their primary bank, people consider accepting financing from a sub-prime lender, or even working with a debt negotiator. Be extremely cautious in these areas of debt restructuring and know that advertisements may be misleading:

• There are companies that engage in predatory business practices, making money as ‘lead generators’ by selling your information to high-cost lenders, adding on borrowing fees, and more.
• Don’t allow yourself to be pushed into a high-interest loan, swayed by claims of ‘credit repair’ or guarantees of automatic debt reduction.
  • The only things that can improve your credit score are time and demonstrating responsible credit use.
• Anyone can call themselves a ‘credit counsellor’ and offer you various debt services.

Licensed Insolvency Trustees are the only government-qualified and endorsed debt help professionals in Canada, and the only specialists authorized to provide Consumer Proposals and other legal debt relief solutions. If you’re unsure simply ask “Are you a Licensed Insolvency Trustee?”.

• You do not need a referral to speak with a Licensed Insolvency Trustee and you should never pay money to be connected with a Licensed Insolvency Trustee.
• At Sands & Associates debt consultations with our Licensed Insolvency Trustees and qualified Insolvency Estate Managers are always free, confidential, and without judgment.

Connect with a BC Licensed Insolvency Trustee Now

Some credit counsellors have a working relationship with major banks and can use this to negotiate a debt repayment plan for you, but credit counsellors and other agents have no legal power and can neither compel creditors to work with them, nor prevent your creditors from pursuing you with collection or court action if you stop making your payments. It’s also important to know that:

• Credit counsellors may promote their plans over other consolidation or legal options you have because they receive money from creditors, getting a percentage of the debt they recover.
• Credit counsellors don’t have to have any specific training, so always do your research to ensure you’re dealing with a reputable organization.

Credit Counselling Plans – Pros and Cons to Consider

Credit counselling plans offer an alternative to consolidate certain debts without borrowing, and for debts that are eligible for a credit counselling plan, a credit counsellor may be able to negotiate a reduction in the interest rate, or an interest-freeze.

Consolidating with a low-interest or interest-free credit counselling repayment plan may work if you:

• Owe a relatively small amount of debt (less than $10,000)
• Have only basic unsecured debts such as credit cards, unsecured loans, or lines of credit (i.e., no amounts owing to Government bodies)
• Can afford to repay all your debt plus the plan’s fees within 5 years

Credit counselling may not be appropriate for consolidating your debt if:

• You have a lot of debt, or your debt-to-income ratio is unfavourable
• You owe any money to creditors who will not work with a credit counsellor (this includes Canada Revenue Agency, student loans, ICBC)
• You want the safety of a secure legal option

Other important considerations:

• Be certain you understand which debts would be covered by your credit counselling plan, how much you are being charged in fees, and whether you can consistently afford the payments.
• Lower (or no) interest consolidation cuts your debt costs, but credit counsellors charge fees for their services (even non-profit agencies), so you need to be sure your plan will actually save you money.
  • Compare the credit counsellor’s fees with what you will save in interest. In some cases, the agency fees could be more than you’d save.

If you want or need a lower your monthly payment you will usually be best off to make a Consumer Proposal to consolidate your debt for substantial savings.

Consumer Proposals VS Credit Counselling in BC – Understand the Key Differences

Compare Monthly Debt Consolidation Payments

The cost difference between varying interest rates and the time it takes you to repay your debt can be considerable. In this example we compare options to pay off credit card debt totalling $25,000 in the next three to five years:

Option 1: Repay $25,000 debt at an 18% interest rate, without any consolidation:

• With 60 monthly payments of approx. $630, the interest paid would total just over $13,000.

Option 2: Consolidate $25,000 of debt borrowing at an interest rate of 12%:

• With 60 monthly payments of approx. $555, the total interest paid would be near $8,400.
• With 36 monthly payments of approx. $830, total interest paid would be just under $4,900.

Option 3: Consolidate $25,000 in a credit counselling plan, with zero interest:

• With monthly payments of $415 + program and service fees, debts would be cleared in 60 months.
• With monthly payments of $700 + program and service fees, debts would be cleared in 36 months.

Option 4: Consolidate and cut debt (by 70%) down to $7,500 with a Consumer Proposal, with zero interest or added fees:

• With monthly payments of $125 total, debts would be cleared in 60 months.
• With monthly payments of $210 total, debts would be cleared in 36 months.

See More – Try our Debt Options Calculator

Free Confidential Debt Advice

To explore all your options for debt management, including consolidation, Consumer Proposals, debt relief and forgiveness solutions, connect with a Licensed Insolvency Trustee for a free confidential consultation.

Sands & Associates serves residents across BC, and we offer our full suite of services online and in-person from local offices across the province. We believe our open and non-judgmental approach to debt help offers our clients a positive and empowering experience, with support to achieve their debt-free goals and live life without the stress of debt.

Book your free confidential debt consultation with Sands & Associates today. Your debt-free future could be closer than you think.

The post What’s the Best Way to Consolidate my Debt? appeared first on Sands & Associates.

The Problem with Credit Card Debt

Any debt can turn into a problem, but credit card debt in particular is often particularly troublesome. In recent studies of our client base published in the BC Consumer Debt Study credit card debt has in fact been called out as a client’s main debt concern five times more than other types of problem debt by insolvent consumers.

Not only do many people regularly use this type of revolving credit for day-to-day purchases, where there’s an immediate need to bridge the gap between cost of living expenses and income (even just between paydays) or cover an unplanned cost, credit cards are often seen as quick, easy solution.

• Consider, if you faced a sudden drop of income even just for two or three months – how would you pay your bills and household costs?
• Debt problems commonly start or are aggravated by things outside a person’s immediate control. A job disruption in your household, a marital breakdown, an illness – those are just a few examples of challenges that can have a devastating financial ripple effect.

The major issue with credit cards is that every time you don’t pay your balance in full by the due date you are going to be charged interest. Even for a small balance, the interest means the cost of everything you’ve purchased has increased.

Is My Credit Card Debt a Problem?

If you regularly carry a credit card balance, here are some warning signs that your credit card debt is (or is becoming) a problem that you should address immediately:

• You’re carrying a balance month after month on your credit card
• You use your credit card for cash advances
• You can’t get through the month without relying on your credit card
• Your balance keeps getting bigger (especially if you’re making payments at the same time)
• You only make the minimum payment required, or just slightly more than
• You’re close to hitting your credit limit
• You are also using payday or ‘fast cash’ instalment loans
• You’re generally feeling stressed about your credit card balances

Read More Signs You Should Deal with Your Personal Debt – Now

Strategies to Control Credit Card Debt

There are a few plans to consider if you want to try a DIY (“do-it-yourself”) approach to managing your credit card bills. However, if you’re struggling to make your payments or have to use credit to get your bills paid, connect with a Licensed Insolvency Trustee right away – a DIY solution is likely to prolong or even aggravate the problem.

Choose a Card to Pay Off First

One place to start with a self-directed plan it to make a list of all your current debts and balances, then decide what makes sense to pay off first. You would make the minimum required payments on all your debts and use extra money (as allocated in your budget) to pay down the account you’ve chosen. Once it’s paid off, move your extra payments to the next, and so on.

You might choose based on one of the following:

• Pay off your debt with the highest interest first, so you’re mitigating the accumulating interest costs
• Pay off your debt with the lowest balance first, to build momentum and keep motivated (though this may cost more in accumulated interest over time)

You may also want to take additional measures such as:

• Using a secured credit card instead of a regular credit card
• Implementing a cash-only spending rule for yourself
• Talking with your creditors to inquire about lowering your interest rate
• Creating a schedule for paying back money you may owe to family or friends
• Closing credit accounts as they are paid off

How to Better Manage Credit and Debt, and Mistakes Not to Make

As you tackle your credit card debt it’s important to think about how it accumulated in the first place so you can take steps to prevent the same thing happening again (where possible):

• Are you overspending because your budget isn’t aligned to your actual income and expenses? In which case you’ll want to invest some time sorting out your budget (being sure to account for funds to pay off your credit cards) and regularly tracking your incoming/outgoing money.
• Making sure your budget is in check and controlling spending will be a key step in any strategy to getting – and keeping – your credit cards paid off.

Refinance Credit Card Balances

Some people may consider applying for consolidation loans to pay off multiple debts under one combined monthly payment. This may be helpful in organizing your debt, and can assist you in paying it off if:

• You can get a loan with an interest rate better than you’re currently being charged on the debts you’re consolidating
• The loan’s monthly payment is lower than your current combined monthly payments
• All (or most of) the debts you owe can be covered in the consolidation
• You can avoid accumulating new debt (through the credit you’ve freed up or otherwise)

Whether you are interested in a loan, balance transfer, line of credit or other borrowing product, you need to be careful to fully understand the terms and what is needed for you to have it paid off.

Try the ‘Rule of 60’ Math

Qualifying for borrowing, being able to afford your payments, staying motivated, having your budget disrupted by outside factors, and staying ahead of accumulating interest can all make paying off your debt difficult when you’re refinancing or using a self-directed repayment plan.

One easy way to spot potential challenges is doing a quick ‘Rule of 60’ calculation: Add up your total (non-mortgage) debt then divide by 60.

• Is the result a monthly payment you could consistently afford to have your debt paid off in five years (60 months)?
• If not, or you feel payments may not be sustainable, a plan such as a Consumer Proposal that has a debt reduction component may be good debt solution to consider. Connect with a Licensed Insolvency Trustee in your province to explore your options in a free confidential consultation and work out a detailed plan that’s right for you.

For many people a Consumer Proposal offers a secure and affordable way to pay off their credit cards and other debts for good.

Learn More About Why Borrowing Isn’t Always Best for Consolidating Debt

Consolidate and Cut Credit Card Debt with a Consumer Proposal

If you can afford a partial payment on your credit card debt AND want a boost in getting to debt-free with less cost or time, a Consumer Proposal is a unique and powerful debt solution you can access by working with a Licensed Insolvency Trustee. Here’s how it works:

Consolidate virtually all your debts totalling up to $250,000 in a Consumer Proposal, a non-borrowing option that will offer your creditors repayment of only the portion of your debt that you can afford to repay.

• Most people offer a monthly payment for a set period (of up to five years), which you’ll make to your Trustee who will then send those payments on to your creditors.
  • Your creditors will agree to write-off the unpaid balance. Total debts can often be reduced from up to 50-80%.
• Almost every type of debt can be included in a Consumer Proposal – from credit cards to income taxes, payday loans to student loans and beyond.
  • You also have the option to keep up financing arrangements for secured debts like your vehicle loan or mortgage.
• There is no borrowing, credit check, or co-signer required to do a Consumer Proposal and your creditors will not be allowed to continue charging you interest (or any collection actions either).
  • No added fees or hidden costs. All you pay is what you’re offering to your creditors.
• Monthly payments are usually substantially lower than bank-based consolidation that requires you to pay all your debts in full with interest – and lower than credit counselling plans that charge fees for services (yes, even non-profit plans) and still require you to repay 100% of your debt, with an interest-freeze on certain debts.

Consumer Proposal Example: You owe $40,000 total in credit cards and other debts and offer your creditors $9,600, paid by way of $200/month for 48 months – cutting your debt over 75%, with a clear date as to when you’ll be debt-free. You can also pay off your Proposal early any time, without penalty.

Preparing for Your Debt Consultation with Sands & Associates

Free Professional Debt Advice

It’s important to get accurate advice and debt services provided by a qualified professional. When you work with a Licensed Insolvency Trustee you can be confident you are dealing with the professional best equipped to help you get out of debt.

Licensed Insolvency Trustees are the only Federally regulated professionals who offer debt management advice and services to consumers. We help people evaluate their financial situation, understand their current and future needs, and explore ways to pay off their debt and ultimately achieve their goals.

The thought of speaking with a professional of any kind about your financial situation can feel intimidating for many people, and we understand that opening up to someone who is essentially a stranger might feel uncomfortable at first.

Sands & Associates offers a non-judgmental and supportive approach to helping people with debt.

• We believe that a debt problem can happen to anyone and that everyone to deserves to be treated with dignity and respect.
• We aim to make our full suite of debt help services accessible for people across BC, with options for in-person or online services – whatever is most comfortable and convenient for you!

There is no cost to connect with one of our qualified BC debt help experts to talk about your situation and find out about your options – knowing is not owing.

Get the debt-free plan that’s right for you. Connect with a friendly, non-judgmental expert from Sands & Associates, book your free confidential debt consultation today.

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Canadian Debt Relief Options

Informally and formally, there are different options that can provide varying degrees of debt relief for an individual. Not every option will be suitable for the debt relief you need – it’s critical that you weigh how each solution works against your specific situation, needs, and goals. Don’t simply settle for an option that doesn’t offer enough benefit for you!

Some people may need debt relief only in the form of a consolidation loan with a consistent interest rate, while others may find their best debt solution is a Consumer Proposal that combines consolidation with debt reduction and a streamlined repayment plan.

Here are some common debt management strategies you might consider if you live in Canada, and the overall measure of debt relief you might expect:

Informal Debt Solutions

Debt Consolidation Loans: Combining your debts into one new bank loan (or sometimes line of credit) can offer some relief in that:

• The interest rate is consistent (and hopefully lower) across all (now combined) debts
• Payments and a pay-off plan are (usually) set, taking the guesswork out of juggling multiple payments and a completely DIY repayment approach

Borrowing as a debt solution is not without potential challenges. Consolidation loans can pose problems of their own and at the end of the day you are still repaying all your debts in full, with interest:

• You need to qualify for a loan that has a reasonable interest rate. Often this is not possible without an asset to pledge as security on the loan, or a co-signer (and both can be risky!).
• If you qualify for a loan with a better interest rate than you are currently paying, your payments may still be high. You need to ensure you can afford to consistently make those payments for the entire duration of your borrowing agreement.
  • Don’t overestimate your ability to meet payment requirements, pay your regular costs of living and have funds left over for savings in case of emergency. Many people find they end up with a consolidation loan and a new balance on their credit cards because they have not taken a realistic look at their monthly income and expenses.

Borrowing Isn’t Always Best for Consolidating Debt – Read More

Credit Counselling Plans: A credit counselling repayment plan may offer relief from ongoing interest charges on debts eligible to be managed through this type of informal plan:

• You can combine many basic consumer debts into a credit counselling plan that runs over a period up to five years
• Creditors often (but not always) agree to stop charging interest on the eligible debts
• Many credit counsellors offer resources to help you boost your financial skills and knowledge

Credit counselling can have some drawbacks however, including:

• Credit counselling plans have a cost, even if you are working with a non-profit agency (non-profit does not mean all services are free). Even with the relief of future interest charges, you may not cut payments substantially since you will be paying a credit counselling fee on top of paying back all your debt to your creditors.
• There are several common debts, including all types of government debts, that aren’t eligible for credit counselling plans.

Many people are unaware that credit counselling is an informal (i.e. NOT legally regulated) debt relief option – anyone can call themself a credit counsellor without any specific training, and there are many aspects of this type of service that are not well supervised.

Debt Settlement Agreements: Debt settlement agents offer services for debt relief by attempting to settle your debt (usually one account at a time) for less than you owe by offering a one-time, lump sum payment that is typically substantially less than the total balance owing. You can also attempt this type of settlement on your own if you already have a lump sum of money.

Proceed with extreme caution when it comes to companies offering these debt negotiation services:

• Most will charge a high fee for their services
  • Many will even charge you to refer you to a Licensed Insolvency Trustee, even though you can connect directly with a Trustee on your own
• Like credit counsellors, there is little oversight for these informal types of debt services
• Because most people need time to save up a lump sum to offer a creditor and are directed to stop paying their debts while they do so, creditors often escalate collection action in the meantime.
  • Agents cannot offer you any protection from your creditors and neither debt settlement agents nor credit counsellors can compel your creditors to accept their services / your offer.

Debt Management – or Debt Mistake? Learn More

Don’t be fooled by advertising – there is no such thing as ‘fast credit repair’ or ‘government debt programs’ ‘government debt grants’ etc. Similarly, clearing your credit history and boosting your credit score simply takes time and some thoughtful strategy, there’s no magic solution to discover.

A few provinces have debt payment alternatives such as Alberta’s Orderly Payment of Debts and Voluntary Deposit in Quebec, but as far as ‘government-approved’ ways to clear debt, the only methods in Canada are the legal debt relief options available by working with a Licensed Insolvency Trustee.

Formal (Legal) Debt Solutions

As Licensed Insolvency Trustees we work with many people who arrive discouraged and/or frustrated because they tried a credit counselling plan or have taken out a consolidation loan to no real success. Even if you’ve tried an informal solution before but not been able to get out of debt, don’t underestimate the huge advantage of the debt relief available through a formal solution working alongside a Licensed Insolvency Trustee.

Consumer Proposals: This legal, non-borrowing consolidation solution offers several considerable debt relief measures. Working with a Licensed Insolvency Trustee you can file a Consumer Proposal that will:

• Consolidate virtually all types of debt (consumer, business, and government debts) with no interest or other added costs
• Offer to repay your creditors the portion of your debt that you can afford to repay, in full and final settlement (reductions of up to 50-80% of your total consolidated debts are common)
• Legally stop creditors from pursuing you for payment, collections or charging interest
• Give you a set repayment plan of up to five years with a clear debt-free end date

There are no fees added to what you pay back to your creditors in a Consumer Proposal. A tariff-based administrative charge will be paid from the money your creditors receive – all you pay is what you’re offering your creditors. For example:

• A Consumer Proposal could consolidate your total debts of $40,000 by offering your creditors $12,600 (31.5% of the total balance outstanding), under which you would make payments of $350 per month for 36 months.
  • No added fees, no interest, no borrowing
  • Immediate relief from creditors
  • Pay off your Consumer Proposal early at any time without penalty

How Much Debt Can a Consumer Proposal Write-Off? Learn More

Consumer Proposals are almost always accepted by creditors and you’ll have the ongoing support of a Licensed Insolvency Trustee throughout the process, including access to one-on-one financial counselling sessions and professional resources.

In situations where it is just not possible to make meaningful repayment on your debts, the final option for debt relief that you may consider is…

Bankruptcy: Personal bankruptcy is a short duration and relatively straightforward process that offers immediate debt relief and can result in 100% forgiveness of all your debts. This often-misunderstood process can provide a financial fresh start in as little as nine months.

To explore all your options and get trustworthy advice about dealing with your debt, a Licensed Insolvency Trustee is the right professional to help you.

Why Work with a Licensed Insolvency Trustee?

Licensed Insolvency Trustees are fully government-regulated and endorsed debt help experts. We are empowered to serve Canadians with a range of debt management services and are the only professionals with the power to provide legal solutions that can allow you to have virtually all your debts forgiven – from credit cards to payday loans, outstanding tax debt to lines of credit and so on.

You don’t need to be dealing with an extreme situation, like not being able to make your payments or being sued by a creditor, to seek support from a Licensed Insolvency Trustee. Although we can stop drastic actions such as a wage garnishment or court process, we always encourage you to seek a Licensed Insolvency Trustee for support as early as possible. Doing so can save considerable stress and worry, not to mention time and money!

Difficulties paying down debt are often shrugged off as ‘normal’, but the reality is that common debt problems like these can be overwhelming – and keep you in debt for years. Does any of the following sound familiar to you?

• You’re not able to pay much more than the required minimum monthly payments on your credit card or other balances
• You make payments then use credit again, effectively keeping you in a cycle of debt dependence
• You’ve consolidated your debt with a loan or other product but still feel financially squeezed
• You feel like lingering debts with ‘bad credit’ or ‘past money mistakes’ are preventing you from moving forward with your financial goals or other milestones
• You’re stressed out, anxious or overwhelmed by your debt situation
• Your current pace of repayment will have you paying (non-mortgage) debt for more than five years

No matter what your personal circumstances, know that debt is a problem like any other in that it does have solutions – and we’re here to help you find the one that’s right for you. 

Connect with a Licensed Insolvency Trustee in BC

Sands & Associates works with residents across BC and our services are available both online and in-person at local offices throughout the province. In less than hour we can help you better understand your situation, weigh the pros and cons of various debt solutions, and give you clear guidance on your next steps with the debt relief option you choose.

We want you to come away from your free debt consultation with a plan to move forward, and confidence that you are on your way with a solution to deal with your debt.

Debt help without judgment, it’s that simple! Get started with your debt-free plan by connecting with a caring expert from Sands & Associates today – book your free confidential consultation now.

The post Options for Consumer Debt Relief in BC appeared first on Sands & Associates.

Consumer Proposal Basics

Combining all your debts into one interest-free monthly payment, your Consumer Proposal allows you to cut your debt repayment down to what you can afford, with the remaining unpaid balance being legally forgiven by your creditors.

In addition to cutting your debt down to what you can afford to repay, some significant advantages to a Consumer Proposal include:

• Virtually all types of debt can be settled, from credit cards to payday loans, student loans to taxes to CERB overpayments and more.
• Your debts are frozen, so balances are no longer a moving target with interest charges continuously being added.
• Creditors who have been pursuing you in collections or even putting through a wage garnishment will be barred from continuing these actions.
• A Licensed Insolvency Trustee will coordinate the entire Consumer Proposal for you, including communications with your creditors.
• Because you don’t need to borrow to consolidate debt in a Consumer Proposal, there are no added financing charges or even additional administrative fees tacked onto your monthly payments.
  • The administration costs of your Licensed Insolvency Trustee are essentially covered by your creditors; calculated and payable from the funds your creditors receive. All you pay is what you’re offering to your creditors.

Consumer Proposal Payment Example

Here’s a quick example of a real Consumer Proposal filed by Sands & Associates – significant debt reduction, no added interest, no added fees:

• A person with debt totalling $42,360 and struggling to afford their minimum monthly payment of over $1,200 per month made a Consumer Proposal to cut their debt by 55% – from $42,360 down to $18,600.
• Their new monthly payment was just $310 per month, and they will be debt-free in five years.

Consumer Proposals are very flexible, tailored to your specific situation and needs – and you can pay off your Consumer Proposal early at any time, without penalty!

How Much Debt will a Consumer Proposal Eliminate?

How Do I Do a Consumer Proposal?

To make a Consumer Proposal the first thing to do is connect with a Licensed Insolvency Trustee local to your province. If you’re anywhere in BC, Sands & Associates can help you – we serve residents across the province and we can help you in person, virtually, or even over the phone.

• You cannot file a Consumer Proposal by yourself, nor can a credit counsellor, debt settlement agent, or any other type of debt management service file a Consumer Proposal for you.
• If anyone is attempting to charge you a fee to speak with a Licensed Insolvency Trustee or telling you they can do a Consumer Proposal for you but are not a Licensed Insolvency Trustee (or an Estate Manager working with a Licensed Insolvency Trustee), this should be a red flag that you are not in the right place!

3 Steps to Starting Your Consumer Proposal

At Sands & Associates we plan to have your Consumer Proposal officially filed in three steps, and this process can be done in person at a local office nearest you, or virtually – whatever is most comfortable and convenient for you.

The timeline here is really driven by you. We understand that once you’ve discovered there is a solution to deal with debt and resolve any debt-stress you’ve been experiencing, you may want to move forward quite quickly.

• Sands & Associates can work with you to get your official Consumer Proposal signed and registered in as little as 24 hours after your consultation should you have an urgent situation.
• Otherwise, most people move through these three steps within a week or two.

The First 60 Days of Your Consumer Proposal

Some important milestones happen in the first 60 days after your Consumer Proposal is formally filed.

1. If you’re working with Sands & Associates, during the first month after you’ve signed your official Consumer Proposal documents you’ll make one of your regular monthly payments.

For most people this is the first payment they are making in their Consumer Proposal; Sands & Associates does not charge any fees to get your Consumer Proposal started.

During this 60-day period you normally don’t need to do anything else.

2. Immediately after filing your Proposal, your Licensed Insolvency Trustee will take over communications with your creditors and send them official notice of your Consumer Proposal – the built-in legal protection has kicked in!

Your creditors included in your Consumer Proposal must now stop contacting you for payment, stop charging interest (or other fees), and cease any legal actions (including wage garnishments or account freezes).

3. Your creditors will have 45 days to consider your Consumer Proposal consolidation offer and let your Trustee know if they are voting to accept it.

Your Consumer Proposal will be legally binding on all your creditors if more than 50% of your creditors (by dollar value) vote ‘Yes’ to accept it.

• Consumer Proposals filed by Sands & Associates are almost always accepted by creditors.
• Even if you have a creditor who votes not to accept your Proposal, or any who don’t vote at all, it doesn’t necessarily mean the Proposal can’t succeed – the Consumer Proposal will still be legally binding on all when it is accepted by at least the 50% dollar-value majority.

Another built-in advantage to Consumer Proposals – creditors can’t just change their mind once your Consumer Proposal has been accepted!

4. Once day 45 passes and your Consumer Proposal is accepted by creditors, we’ll allow another 15 days to pass, after which your Consumer Proposal will be deemed to be court-approved.

After this deemed court approval (day 60) you can work through the rest of your Consumer Proposal and continue with your monthly payments (assuming that is what your Consumer Proposal offered).

Learn More About What to Expect After Your Consumer Proposals is Filed

Compare Your Debt Options

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

How Long Will It Take to Finish a Consumer Proposal?

How long your Consumer Proposal takes to finish depends on the payment terms you’ve offered. Although most people offer monthly payments, those could range anywhere from one month to up to sixty months and virtually any timeframe in between (24 months, 36 months, etc.).

Some people plan to complete their Consumer Proposal consolidation by other terms however, and in these situations a Consumer Proposal could be finished in just a few months. Some common non-monthly payment Consumer Proposal examples include offering:

• A lump-sum payment (either from yourself, or a third party such as a family member)
• Proceeds from the sale of an asset you no longer want to keep (you can otherwise expect to keep all your assets)

As well as completing the payment terms you offer, as part of your Consumer Proposal you also commit to:

• Keeping your taxes filed and paying any new balances as required
• Doing two private financial counselling sessions with one of our Qualified Insolvency Counsellors
  • These one-on-one sessions focus on providing you resources for credit building, budgeting, savings strategies, and other financial skills. We’ll also offer additional support for other financial help areas wherever possible.
• Staying in touch with your Licensed Insolvency Trustee – we’re your resource the entire process

Recap the Basic Timeline for Most Consumer Proposals

Depending on your Consumer Proposal offer, you could be totally debt-free in five years or less following your debt consultation with Sands & Associates:

• Have a consultation, review your financial information, then sign your Consumer Proposal documents – and stop making your regular debt payments
• 60 days after signing you’re underway with your new reduced Consumer Proposal payments
• After your final payment is made, you’ll receive an official Certificate of Full Performance and your unpaid debt balances will be considered forgiven / written-off by your creditors

If you’re looking into options to consolidate debt, forgive debt, or just simplify or lower your monthly payments, a Consumer Proposal can be a great solution. It’s worth taking an hour to explore with a Licensed Insolvency Trustee – debt-free could be a lot closer than you thought possible!

Connect with a local non-judgmental debt expert who cares and get started with your debt-free plan today. Book your free confidential debt consultation now!

The post Consolidating Debt with a Consumer Proposal: Step-by-Step appeared first on Sands & Associates.

Read on to learn key considerations when it comes to debt consolidation, including options for both borrowing – and non-borrowing– consolidation solutions.

Lender-Based Debt Consolidation Options in BC

Debt consolidation with a bank follows a basic concept: You borrow a lump sum amount from one lender and use these borrowed funds to pay off multiple other debts. There’s more than one way to consolidate debt by borrowing – some common lender-based consolidation options may include:

• Debt consolidation loans
• Home equity loan (sometimes called a second mortgage or refinancing your mortgage)
• A line of credit or overdraft
• A balance transfer to a credit card

Regardless of how you consolidate, usually the intended advantages of debt consolidation are that you would:

• Have fewer monthly debt payments to juggle
• Free up monthly cash-flow and be able to save money in the long-term by refinancing your existing debts at a lower interest rate
• Get a clear timeline as to when your now-consolidated debts will be paid off

Unfortunately, and despite having many different product options, when you borrow money for consolidation the intended goal of eventually becoming debt free may be quite difficult to achieve.

Why Borrowing Money for Debt Consolidation Can Be a Problem

It’s common that people looking for a consolidation solution to deal with debt are confronted with the reality that solving their financial crunch is more of a challenge than their bank is willing to take on. Debt consolidation loans and other types of consolidation financing are often out of reach for consumers because of these three common factors:

1. Debt Consolidation Financing is Difficult to Qualify For (Especially at Best Rates)

To qualify to borrow money for a consolidation option at an interest rate better than most credit cards and other consolidation-eligible debts, at minimum you can expect to need to prove you have stable income AND a high credit score.

• If you’re carrying a lot of debt in relation to your take-home pay, this alone can make favourable borrowing options difficult, if not impossible to qualify for.

Another challenge with borrowing is that lenders want assurance they’ll recover their money – it’s rare to get consolidation loans otherwise – and this is commonly done with guarantees by:

• A co-signer / co-borrower. This person will be responsible for 100% of the unpaid balance in the event you don’t meet all repayment terms.
  • Many loans also allow a lender to request full payment of the remaining loan balance immediately from the co-signer if they are called on to cover missed payments. This is often known as an ‘acceleration clause’.
• An asset. The lender may put a lien on a major asset such as your vehicle or your home equity. You then risk losing your home or other asset pledged if you default on your payments.

Not all lenders are going to offer great (or even good) borrowing terms. Be especially careful looking for lenders online. There are many organizations that make money as ‘lead generators’; selling your information to actual lenders, attempting to charge you to borrow money and other predatory “business” practices.

Credit Score Concerns: Sometimes people struggling to mange debt worry about temporarily “losing” a good credit score by using legal debt solutions. For virtually everyone, being debt-free is in your best interest – and if your debt is a nuisance, you will benefit more from getting out of debt than maintaining a credit score high enough to borrow more. Learn more about mistakes not to make in managing debt and credit ratings.

If you qualify for any borrowing, you should be certain you can consistently manage the repayment terms for the entire time needed to pay the debt off. Don’t assume that since a debt consolidator is offering you a loan that it’s the best option to pay off your debt, or that you can afford it.

2. Monthly Debt Consolidation Payments and Costs of Borrowing Can be Expensive

Interest rates offered can vary hugely and are sometimes very high (especially with sub-prime lenders).  We’ve seen numerous examples where the cost of interest charges and/or monthly and miscellaneous fees can make for a monthly payment that’s even higher than your original payments.

• Factor in the monthly AND total costs of borrowing before you move forward with any type of consolidation.
  • Don’t forget to consider any creditors that will need to be paid outside of any consolidation financing you can qualify for. (Canada Revenue Agency for example).
• If you’re using a credit card balance transfer to consolidate credit card debts watch out for promotional rates that may expire.

Be aware that you might simply have too much debt to pay off using a loan or informal type of debt repayment plan, since neither of these options allow you to cut your debt – or even manage all types of creditors. One quick way to get some direction on the best type of consolidation for you is to do the “Rule of 60” math:

• Add up your total non-mortgage debts, then divide by 60. (i.e. $25,000 / 60 = $416)
  • Is that number (i.e. $416) an affordable monthly payment for you over the next 60 months?

If you need (or want) to lower your monthly payment to get to debt-free in five years (60 months), consider a Consumer Proposal as a non-borrowing consolidation alternative. As we’ll discuss, this unique legal debt solution could give you your best debt consolidation option, combining (non-borrowing) consolidation and debt negotiation – and a Consumer Proposal is often used as a solution to consolidation financing that has become unmanageable.

3. Consolidation Financing Can Take a Long Time to Pay Off

You may find yourself paying off your consolidation for a long time – three, five, seven, even up to 25 years depending on the lending terms you’ve been offered. A lot can happen in just a few short years and having long-term debt beyond five years can leave your future self seriously strained.

• Avoid taking on more debt or continuing to use credit while you’re paying off money you borrowed for your consolidation, otherwise debts can accumulate to where you may not be able to afford all your payments.
  • Also avoid the temptation of borrowing more than you need for consolidating.
• If you’ve used a line of credit to consolidate debt, be aware that without a set repayment requirement you may need a lot of self-discipline to make substantial payments beyond the minimum required amount.

The bottom line is that consolidation loans and financing simply change who you owe money to. At best you get a lower interest rate and a more “affordable” payment – less than that, you may struggle to pay it all off and even risk the creditor’s recourse to your asset or co-signer.

Many debt professionals say it’s hardly ever a good idea to co-sign debt with someone else – here’s why.

It is possible to solve a debt problem without taking on more debt – and depending on the non-borrowing consolidation option you choose you can avoid added service fees, miscellaneous costs and other risks.

BC Debt Consolidation Options That Don’t Require Borrowing (or a Good Credit Score)

If you’re a BC resident here are two other ways you can consolidate your debt without needing to borrow money. Since one is an informal option and the other a legal solution, there are some key differences between these two approaches – both however will not require you to hold a high credit score, nor require you to take on more debt to qualify.

Credit Counselling Debt Management Plans

Working with a credit counsellor your eligible debts will be consolidated and managed under one plan and repaid with one (usually) monthly payment. With credit counselling consolidation no borrowing is required and you:

• Must pay back 100% of the debt you consolidate in your credit counselling plan.
  • Your credit counsellor can often negotiate to stop ongoing interest charges.
• Pay fees to the creditor counsellor for using their services / program plan.
  • Credit counselling organizations may provide resources at no cost, but debt management programs have fees, sometimes on a sliding scale.
  • No credit counselling is free – both non-profit and for-profit credit counsellors charge various fees.

As well as the added debt consolidator / credit counsellor’s costs, there are some other potential drawbacks to credit counselling debt management plans to be aware of and consider.

Common Problems with Credit Counselling Consolidation

Even though you’re streamlining your debts and getting a break on interest, informal debt management plans can still leave you struggling with expensive monthly payments and too few benefits. Be sure you understand the process and costs in detail, and are aware of all limitations:

• Not all creditors will work with credit counsellors, and credit counsellors don’t have any legal power to enforce negotiations or prevent creditors from withdrawing from the plan and pursuing you if you miss a payment.
• Credit counselling is not a federally regulated industry or profession, so your recourse should there be any issues or conflict with your provider may be minimal. Take time to carefully research any organization you consider hiring to help you.
  • Besides working with a Licensed Insolvency Trustee on a legal debt solution (such as a Consumer Proposal, Division I Proposal, or bankruptcy) there is no such thing as a government-approved or affiliated debt management or forgiveness program.
  • Learn more and compare key differences in non-borrowing debt solutions – Consumer Proposals VS Credit Counselling.

For those who want a cost-effective solution to pay off their debt in a manageable timeframe, filing a Consumer Proposal is often the best way to consolidate debt. A Consumer Proposal allows you to consolidate virtually all types of debt interest-free AND cut the balance down to what you can afford to repay. You’ll work with a Licensed Insolvency Trustee who will coordinate the plan and payments, and creditors will agree to write-off the unpaid balance.

Consumer Proposal Debt Consolidation

Consumer Proposals are a unique solution that offer great advantages over other consolidation options. Like a consolidation loan you’ll only make one simple (usually monthly) payment, but you won’t be borrowing money or paying interest charges, and unlike credit counselling plans you’re not charged added professional or program fees.

Not only that but with a Consumer Proposal the amount of debt you have can be cut and forgiven, and how long your payments last are based on your personal circumstances but will never extend beyond 60 months. For example:

• Your total consolidated debt could be cut by up to 50-80%
• You might propose a one-time lump-sum payment, or make monthly payments for up to 60 months

Doing a Consumer Proposal you’ll get a transparent legal process with built-in consumer safeguards and resources, including:

• Generally the lowest monthly payment of all consolidation options available
• Automatic protection from your creditors (even government creditors like Canada Revenue Agency)
• One-on-one financial counselling with a qualified counsellor

Consumer Warning About Debt Proposals

Advertisements from debt settlement agencies and out of province debt consolidators and poolers can be misleading. It’s important to know that you do not need a referral to work with a Licensed Insolvency Trustee, and only a Licensed Insolvency Trustee can help you do a Consumer Proposal.

The best approach is to connect directly with a Licensed Insolvency Trustee based in and local to your province. In an hour or less we can discuss your situation together, your overall needs and goals and calculate a Consumer Proposal that would be ideal for you.

• There’s no obligation to commit to moving forward working together
• There is no cost to discuss all your options, including but not limited to Consumer Proposals
• Consultations are private and confidential, and may be done in-person or virtually

Over the years Sands & Associates has worked with tens of thousands of people in BC and we are proud to offer debt help with a supportive approach. We welcome you to a non-judgmental space to ask questions, learn about debt options and resources, and take charge of your debt feeling empowered and well-informed.

Learn more about Consumer Proposals, debt consolidation and other options to deal with debt in BC. Sands & Associates’ friendly team have “Debt Smart with Heart” and full services are available in-person or remotely. Book your free confidential debt consultation now.

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