Debt Counseling To Reduce The Burdens Of Debt

Until recently, most Canadians have avoided taking on significant amounts of debt to pay for everyday expenses. Unlike its southern neighbor, Canada has always been known as a stronghold of personal fiscal responsibility.

The recent financial crisis and the recession that it produced dramatically shifted this paradigm. In the past few years, millions of Canadians have taken on crushing debt loads just to keep their heads above water. For many, this is a losing battle: From Newfoundland to Alberta, thousands of folks throw in the towel each year and choose to file for personal bankruptcy.

Chances are good that you’re feeling the pinch as well. If you’ve taken on excessive amounts of debt in an effort to maintain your standard of living, you’ve placed yourself in a precarious position. As your bills mount and the minimum payments on your outstanding obligations grow larger with each new billing cycle, you run the risk of missing a payment and incurring the wrath of your creditors.

If you’re finally ready to break this unhealthy cycle, talk to a debt counseling professional. While debt counseling is just one of several proven methods of reducing the burden of debt, it offers several distinct advantages.

Upon your enrollment in a credit counseling program, the unpleasant phone and e-mail harassment to which you’ve been subjected by your creditors will cease almost immediately. Going forward, they’ll be dealing exclusively with your credit counselor. Rather than have to worry about screening calls from collection-agency representatives, you’ll be able to focus on drawing up a new household budget.

The mechanism behind debt counseling is simple. Once they’ve taken your case, your credit counselor will begin negotiating lower interest rates and more generous repayment schedules with each of your existing creditors. This approach to debt relief has worked well in the past: From British Columbia to Quebec, credit counseling participants have seen the effective interest rates on their credit cards and personal lines of credit slashed by 50 percent or more.

If you’ve missed payments in the past, the average interest rate on your current debt mix could be as high as 25 percent. In this case, credit counseling may save you a significant amount of money. On a $10,000 balance, a 50 percent reduction in your effective annual interest would lower your payments by $1,250 each year.

Many of the non-profit outfits that perform this service receive funding and guidance from banks, credit card companies and other for-profit lenders. This may seem like a conflict of interest, but it’s actually a guarantee of results: Since credit counselors owe a great deal to their big-money benefactors, it would be irresponsible for them to abdicate their responsibility and allow you to default on your obligations.

Likewise, your creditors have an interest in cutting deals that lower your interest rates and permit you more time to repay your outstanding balances. Failure on their part to do so might push you into bankruptcy, in which case they’d be lucky to walk away with more than a fraction of your original balance.

There are a few drawbacks to the debt counseling process. For one, it takes a long time: Depending upon the scope of your debt, it may take five to seven years to work through your program. Credit counseling may also deal a serious blow to your credit score. In this regard, the process is indistinguishable from bankruptcy.

Even after you’re out of debt, the negative credit effects of using debt counseling can linger for several more years. You can’t recover from a painful punch to your credit overnight, and the process of rebuilding your financial reputation can be downright frustrating.

Worse, debt counseling may not be the most cost-effective debt-relief solution. The process merely reduces your interest rates without shrinking the principal balances on your loans. While a $1,250 annual cut to your interest payments translates to $7,500 over six years, you’d be able to save even more than that by shrinking the actual amount that you owe.

Debt settlement can do just that. Like credit counselors, debt settlement providers negotiate directly with creditors to save their clients money. Unlike credit counselors, these professionals have proven to be adept at reducing the principal balances on even the most fearsome debt loads by 40 to 60 percent. On a $10,000 balance that’s accruing interest at a rate of 25 percent each year, this translates into an immediate savings of $5,000 and annual interest savings of $1,250.

What’s more, debt settlement takes far less time than debt counseling. While every case is different, typical work-through times range from 12 to 48 months.

Stop putting off your quest for financial freedom. Make the most important call of your life today and start planning for a debt-free future!


Debt Consolidation

If you’re like most Canadians, you’re probably used to making sacrifices by now. Although the credit crisis that affected much of the developed world didn’t deal Canada a direct blow, the resulting recession dramatically reduced global demand for natural resources and industrial products and put many Canadian firms in a terrible spot.

Even if you survived the carnage unscathed, you likely haven’t received a pay raise in some time. Meanwhile, you’ve continued to rack up charges on the “low-interest” credit cards that you picked up when times were good and banks were giving them away like candy. Now you’re paying through the nose to run a balance on them.

If you’re struggling to make minimum monthly payments that cover little more than your ever-growing interest burden, stop simply treading water and resolve to swim your way out of your debt problem. Finding debt consolidation in Canada is easy: You’ve probably seen ads for debt consolidation loan providers, credit counseling services, and even bankruptcy lawyers online or around town.

Retaining one of these debt relief outfits is as easy as picking up the phone or clicking a URL, but first you’ll need to determine which debt relief option is right for you. Whether you live in a small prairie town in Manitoba or a bustling industrial city along Ontario’s Golden Horseshoe, your particular mix of unsecured debts is unique. Before you commit to any form of debt relief, carefully consider the advantages and drawbacks of each of your options.

Among the most popular forms of debt relief, debt consolidation loans are a refinancing tool that allows you to swap your disparate outstanding debts for a single payment to your loan provider. These products have one major advantage: They let you cancel your existing debts in one fluid movement and consolidate your entire debt load into an easy-to-understand loan with a fixed interest rate.

If you’ve missed a credit card or business loan payment and find yourself accruing penalty interest at ruinous rates, debt consolidation loans may save you serious money. However, they’re not cheap: Since banks and other lenders consider anyone who needs these loans to be a credit risk, they won’t be shy about charging a significant premium over market interest for it.

Before you take out a debt consolidation loan, make sure it’s worth the trouble. If you’ve missed a few credit-card payments and accrued penalty interest on your outstanding credit card balances, your effective annual interest rate may approach 25 percent. For every $10,000 worth of debt, that’ll cost you an extra $2,500 in annual interest charges.

In this situation, taking out a consolidation loan at 15 percent interest would save you $1,000 per year on every $10,000 that you owe. That’s undeniably a good deal.

Unfortunately, debt consolidation lenders are notorious for their unwillingness to accommodate any deviation from their loans’ pre-determined repayment plans. Whereas credit card companies may let your debts pile up indefinitely, consolidation lenders prefer to keep you on a short leash: If you miss a payment or consistently fork over less than the agreed-upon amount each month, you risk pushing your loan into default and devastating your credit score.

Debt consolidation loans may save you some money around the margins of your debt load, but they won’t reduce the principal amount that you owe. Declaring bankruptcy is one way to reduce or eliminate your outstanding debts in short order, but the long-term costs of doing so can be dire.

The laws governing bankruptcy may differ from province to province, but few financial professionals from British Columbia to Quebec recommend using it as anything but a last resort. The reason for this is simple: Bankruptcy has far-reaching, long-lasting consequences for your credit score, affecting your ability to secure credit for a decade or more.

It may not be the perfect solution, but debt settlement offers several advantages over other forms of debt consolidation in Canada. Whereas debt consolidation loans do little more than reduce your outstanding balances’ growth rates and don’t meaningfully reduce the amount of time it takes to pay down your debts, the debt settlement process may eliminate your debt burden in 12 to 48 months.

Although every debt situation is different, debt settlement has a proven record of success. Depending on your creditors’ willingness to settle for less than what you owe, the debt settlement process may eliminate 40 to 60 percent of your total outstanding balance.

If you’re struggling to make the minimum monthly payments on your credit cards and other unsecured debts, stop wondering about where you’re going to get the money to break your cycle of debt and start doing something about the problem. Start the debt settlement process today and look forward to better credit and a brighter future.