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6 Easy Ways to Improve Your Credit Score

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There are easy ways to improve your credit score and improve your chances of getting approved for a low-rate personal loan, specialty credit card, or another financial product with preferential terms. To boost your credit, it is important to pay off your balance, pay bills on time, and review your report on a regular basis.

Pay Off Your Balance

To improve your score, it is a good idea to pay off your balance every month. This is a way to build a strong payment history and pay less in interest charges. Paying the balance in full also shows financial institutions that you are a trustworthy borrower. Make sure you keep your balance-to-limit (credit utilization rate) low to improve your score. This also shows banks that you can handle credit.

To establish a solid payment history or improve your score, make small card purchases on a regular basis and pay the balance on time and in full.

Build a Credit History

There are different ways to go about this, and one is to get a cosigner with a very good or excellent credit rating. This can be your mother, uncle, friend, or someone else. While applying together with a cosigner improves your chances of being approved, the cosigner is also responsible for repayment. Another option is to ask your parents or a close relative to add you as an authorized user on their card. In this case, you are not responsible for repayment, and it is important to handle credit responsibly. A third option is to apply for a department store card and make small purchases. Department store cards usually go with higher interest rates, but responsible use can help build credit. There are added benefits for customers, including discounts on merchandise, rewards, and freebies. Customers also benefit from deal updates and coupons which many stores send by mail. Some department store cards go with higher limits than standard cards, and it is best to avoid splurging.

Get a Secured Credit Card

This is a good way to improve your score, and the best part is that a secure card works like standard cards. You can use it to:

  • Make payments in-store
  • Make payments online
  • Make purchases
  • Book a hotel room

You are free to pay the outstanding balance on or before the due date. Like standard cards, interest charges apply if you only pay the minimum or don’t pay the balance in full by the due date. The main difference between secured and unsecured cards is that you will be asked to make a cash deposit. The credit limit will be equal to or less than the cash deposit made. Basically, the deposit serves as collateral in case that you are unable to pay off the balance. Again, the best strategy is to make small purchases and pay the full balance. A secured card will help you improve your score and what is more, there are added benefits such as low annual fees, low introductory interest rates, no credit check, discounts on gas, and more. Some issuers also offer optional features such as travel insurance, identity protection, and roadside assistance.

Keep in mind that some financial institutions have a minimum income requirement for both unsecured and secured cards. Your application may be declined if you have declared bankruptcy during the past 7 years.

Pay Utility Bills on Time

Obviously, it is important to pay your bills in a timely manner, including utility bills such as gas, electricity, phone, water, etc. Late payments will hurt your credit score. While paying bills on time does not help improve your score, delinquent bills show on your report. This is especially true if you are significantly behind on bill payments. In this case, the utility company is likely to contact a collection agency and send your account to them. Collection agencies report delinquent bills to the credit bureaus, and this will have a negative effect on your credit score. One way to avoid late payments, whether credit card payments or utility bills, is to set payment reminders.

Regularly Review Your Credit Report

You may want to review your credit report on a regular basis to check for errors and omissions. You are entitled to a free copy of your report on an annual basis. Make sure you report any inaccuracies or mistakes because they can have a negative effect on your score. What is more, if you find unauthorized transactions, bank accounts that are not yours, or anything else, you will know that you are a victim of fraud or identity theft.

Limit Credit Applications

To improve your score, make sure you limit credit card applications because financial institutions place an inquiry on your report. The number of inquiries made within the past year accounts for 10 percent of your score. Multiple applications with different issuers will affect your score if they are made within a short period. In fact, many issuers are likely to reject applicants who make multiple applications. It is also a good idea to limit credit card applications if you plan to apply for a secured or mortgage loan.

Other Ways to Improve Your Score

There are other ways to improve your credit score, and one is to negotiate with your creditor to waive late fees and penalty charges, reduce the minimum payment, or reduce the interest rate. This will make it easier for you to pay the balance by the due date and thus avoid credit blemishes. Some financial institutions are willing to settle for less than what the borrower owes and will then close the account. Obviously, bankruptcy is a last resort and if possible, it is best to avoid declaring bankruptcy. It will cause your credit score to plummet, and most financial institutions are likely to turn you down, whether applying for a credit card, unsecured personal loan, or car or student loan. You should also avoid default, delinquent accounts, foreclosure, and other negative items and events.

Components of Your Credit Score

Finally, it is a good idea to learn more about the different components of your credit score, including payment history, amounts owed, and length of history. Your credit mix, for example, includes the types of loans borrowed, including auto, personal, and student loans, mortgages, specialty and standard credit cards, and others. Your credit utilization ratio is also an important factor, and borrowers with utilization ratios of up to 5 percent usually have stellar credit scores. Those with high utilization ratios have low and average scores, which shows that they have multiple missed or late payments, borrow close to the limit, and max out their credit cards. The length of your credit history is also an important indicator and makes 15 percent of your score. A long history gives an insight into and information about your financial habits, borrowing patterns, and behavior. The most important indicator is your payment history which makes 35 percent of your score. Obviously, customers who always pay the balance in full have higher scores than those who have late or missed payments.

5 Types of Credit Cards for People with Bad Credit

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People with bad credit have more limited options but banks and lending services offer products to Canadians from all walks of life. Some of the options to consider are secured and payday loans, peer to peer lending services, and department store, prepaid, guaranteed, and secured credit cards. Borrowers with tarnished credit are usually turned down when applying for specialty credit cards with promotional rates, exclusive discounts, high limits, and other perks. The good news is that banks offer credit cards that allow consumers to make purchases, pay bills, and improve their credit profile.

Option One – Prepaid Credit Cards

Prepaid cards are also known as re-loadable and require a deposit to be made by the user or a third party, i.e. employer, friend, or parent. They are offered by major issuers such as AMEX, MasterCard, Visa, and Discover and are getting quite popular among borrowers with poor and bad credit. They can be used at home and abroad for in-store and online purchases. The main advantage is that a deposit is not required to open an account. Moreover, issuers offer prepaid cards to minors to help parents teach teenagers about credit and financial discipline. While customers benefit from the fact that interest is not assessed, there are annual fees, and purchasing and other fees.

Desjardins Prepaid Card

This card is re-loadable, and users are not required to deposit a minimum amount to make purchases. No credit check is required, and there are no minimum balance requirements. Borrowers with different credit profiles are welcome to apply. They are offered standard benefits such as contactless payments and zero liability. Applicants are free to request additional cards, and the annual fee is $4.95. The card can be used to make withdrawals and purchases.

  • No transaction charges
  • Annual fee: $6.95
  • Annual fee for users aged 16 to 25: none
  • Maximum amount to transfer to a checking account: $5,000

RBC® Visa‡ Commercial Prepaid Cards

RBC Royal Bank also offers a prepaid option that allows users to make purchases at retail stores, by phone, and online and features perks, incentives, and bonuses such as:

  • Dealer and sales incentives
  • Safety awards
  • Holiday bonuses
  • Product launches

The bank also offers employee benefits such as customer promotions, loyalty rewards and customer gifts, and door prizes. The maximum value to load to your card is $2,500 and the minimum – $25.

  • No inactivity fees
  • No maintenance and usage fees

Scotiabank® Prepaid Reloadable VISA card

This is yet another prepaid card that requires no credit check and is offered to customers with less than perfect credit. Reloads are free and easy to make, and users earn bonus points on purchases. Every $5 in purchases earns 1 point, and customers also use a SCENE membership card to redeem points toward free movies at Cineplex Odeon Theatres. Standard benefits such as zero liability protection are offered, and there is no need to apply.

  • No interest charges
  • Annual fee: $10

BMO Prepaid Travel MasterCard

The Bank of Montreal offers a prepaid MasterCard with benefits such as emergency replacement and purchase protection.  There are minimum and maximum load amounts, from $100 to $10,000.

  • Annual fee: $6.95
  • Additional cards: $6.95
  • Interest rate: none
  • Signup fee: $9.95

There are cash advance, refund processing, and other fees. On the good side, this is a convenient card to make purchases at home and at over 30 million locations worldwide. It is easy to qualify and get approved provided that you are of legal age and a permanent resident or Canadian citizen.

credit-cardOption Two – Secured Credit Cards

The main difference between prepaid and secured cards is that the latter require a deposit that is equal to the credit limit available. Both options, prepaid and secured, are available to customers with bad credit. Secured cards have pros and cons, the major benefit being that payments are regularly reported to the bureaus. This means that borrowers have the opportunity to rebuild or build credit. Customers are not sent to collections in case of default, and the security deposit is used to pay the outstanding balance. On the downside, the interest charges are higher, and there are fees involved.

No-Fee Scotiabank Value VISA Card

This card is a great choice in that it goes with a low intro rate of just 3.99 percent during a period of 6 months. The fact that there are no balance transfer fees means that borrowers get a low-cost solution and save money on transferring high-interest balances.

  • Interest rate: 99 percent
  • Annual fees: none
  • Grace period: 21 days or longer
  • Credit limit: $500 or higher

BMO Preferred Rate Mastercard

BMO offers standard and exclusive benefits such as travel services and extended warranty and helps cardholders increase their purchasing power. There are two options to save money on interest and annual fees:

Option 1:

  • Interest rate: 11.9 percent
  • Annual fee: $20

Option 2:

  • Interest rate: 17.5 percent
  • Annual fee: $0

The interest-free period is at least 21 days. BMO offers plenty of added perks such as roadside assistance and medical protection, trip cancellation, and travel protection.

Home Trust Equityline VISA Card

A good alternative to other secured cards, Visa by Home Trust offers the opportunity to earn 1 percent cash back on all purchases. It is designed as a tool for business funding, debt consolidation, purchases, and home renovations. The credit limit or line of credit that consumers qualify for is based on their home value, mortgage, second mortgage, and other factors. Applicants usually qualify for a credit line of up to 80 percent of their current home value, minus outstanding mortgage balances.

  • Interest rate: 99 percent
  • Annual fee: none

Option Three – Guaranteed Credit Cards

A guaranteed card is another option for poor credit borrowers and is also known as pre-approved and instant approval. Issuers often emphasize the fact that no credit check is required to get approved. At the same time, most issuers are interested in the kind of payment and borrowing history that customers have. The goal is to assess their credit eligibility. The main benefits for applicants are more lenient criteria and easier approval. On the downside, while it is easier to qualify, some consumers see their applications turned down.

Capital One Guaranteed Secured MasterCard

Capital One advertises guaranteed approval for applicants with no credit history. There is a security deposit of $75 or $300 which serves as collateral and is fully refunded once customers choose to close their account. This card is a good choice for consumers who seek to improve their credit rating and comes with extras such as emergency cash advances and zero liability.

  • Interest rate: 19.8 percent
  • Annual fee: $59

National Bank of Canada MasterCard® MC1 Credit Card

The MC1 MasterCard is advertised as a practical and convenient payment solution that helps customers to control and limit their spending. It is also a good tool to build credit history. Canadian residents of legal age meet the requirements. They are asked to provide financial and employment information such as bank accounts, card balances, etc.

  • Annual fee: none
  • Maintenance fees: none
  • Interest on cash advances and balance transfers: 21.99 percent
  • Interest on purchases: 19.99 percent
  • Credit limit: $500 or higher

Home Trust Secured VISA

Customers can use this card to make payments at retail locations and online, for hotel bookings, and to make withdrawals. Home Trust advertises guaranteed approval and the option to add an authorized user. There are two options:

Option 1:

  • Interest rate: 19.99 percent
  • Annual fee: none

Option 2:

  • Interest rate: 14.9 percent
  • Annual fee: $59

The deposit varies from just $500 to up to $10,000, and the interest-free period is 21 days or longer. Other fees apply, including rush plastic, ATM charges, and account maintenance fees for inactive accounts.

credit-card-2Option Four – Low Interest Credit Cards

A low interest card is the perfect choice if you want to save on interest charges. The minimum payment is usually lower, and there are perks and added benefits such as cash back or bonus points, concierge service, travel assistance, and others.  A lower minimum payment may work to the advantage of cardholders or it can be an issue. It can become unaffordable if the issuer calculates it as a percentage of the outstanding balance plus charges.

Desjardins VISA® – Modulo GOLD

Desjardins offers a VISA card with a competitive interest rate, complimentary travel insurance, and rewards program. Additional cards are offered free of charge. Through the rewards program, customers are free to redeem their points for donations to NGOs, financial services and products offered by Desjardins, show tickets, gift cards, and travel rewards. Discounts on car rentals are also offered.

  • Annual fee: $50
  • Interest rate: 9.90 percent

RBC Classic Low Rate Visa

This card by Visa is a great low-cost solution to reduce interest charges and transfer high-interest balances. The card goes with optional and complimentary benefits such as card registration service, commission-free travelers checks, and autopayment service. To apply, customers need to provide information such as annual income, employment status, social insurance number, etc.

  • Annual fee: $20
  • Interest on cash advances: 11.99 percent
  • Interest on purchases: 11.99 percent

CIBC Select VISA

This is a low-interest card with optional benefits such as emergency travel medical insurance, payment protector insurance, and others. Canadians who add authorized users are free to set spending limits. They can request up to three additional cards with no annual fee. Only applicants with a household income of at least $15,000 qualify.

  • Interest rate: 13.99 percent
  • Annual fee: $29

Option Five – Store Credit Cards

Department store credit cards usually have higher rates but offer benefits such as promos and exclusive discounts. It is easier to qualify with bad credit, and store cards allow customers to save on big-ticket, one-time, and daily purchases. If you have a thin credit file, this is a good choice to boost your rating, especially if you frequently shop at a certain department store.  Many stores offer ongoing perks, incentives, and rewards such as gift wrapping, deals, free alterations, and more.  There is an option to sign up for the store’s newsletter to get regular updates and information on promos and sales.

HBC Credit card

Hudson’s Bay offers a MasterCard with complimentary bonuses, rewards points, free shipping, and other perks. Every $1 spent on in-store purchases earns 2 points. Cardholders also get a 25 percent bonus on rewards points earned at other stores. They can be redeemed for air miles, Esso points, or HBC gift cards. There is an option to donate them to charities.

  • Annual fee: none
  • Interest rate: 29.9 percent
  • Grace period: 21 days or longer

Walmart Rewards™ MasterCard®

Walmart features a rewards credit card with plenty of added benefits such as pre-authorized payments, personalized checks, and free additional cards. There are optional and standard benefits such as balance protection plans and recurring bill payments. Cash advances are also available. Customers earn 1 percent in rewards on regular purchases and 1.25 percent on Walmart purchases.

  • Standard interest rate: 25.99 percent
  • Cash interest rate: 21.49 percent
  • Preferred rate: 19.89 percent
  • Grace period: 21 days
  • Annual fee: none

Canadian Tire Options® MasterCard®

This is a rewards card that allows consumers to earn Tire Money on regular purchases, participating gas bars and other retailers, and Canadian Tire in-store purchases. Customers earn 10X points on purchases at PartSource, Mark’s, Sport Chek, and Canadian Tire stores.  The card also features added benefits such as easier returns, flyer bonuses and contactless payments.

  • Interest rate: 19.99 percent
  • Annual fee: none

Canadian Tire offers a zero interest period of 12 months if you spend at least $200 in-store on mowers and tractors, wardrobes, appliances, auto service, wheels, tires, etc.

Conclusion

While consumers with a bad credit file and low score have more limited options, they are free to choose from low interest, prepaid, secured, department store, and guaranteed cards. Major Canadian banks, retailers, department stores, and credit card companies offer cards to borrowers with credit issues and poor and fair scores.

What to Do If You are Declined for a Debt Consolidation Loan

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Debt consolidation is a popular method in Canada to manage heavy debt. This technique allows a debtor to combine all existing debt. By doing so, the debtor can negotiate to pay a single interest rate for all debts. Also, multiple loan payments can be combined into a single, more manageable monthly payment.

This method is a convenient way to reduce overall debt. All debtors are technically eligible for this combinative repayment method. Unfortunately, a few do get their refinancing applications turned down. If you applied for this kind of repayment scheme and were declined, don’t worry. All is not lost. There are other solutions available to you. Read ahead to find out what to do when your refinancing application is not accepted.

Find the Reason Your Debt Consolidation Request was Turned Down
First of all, you need to know exactly why you refinancing request was turned down. This reason is important to understanding your current situation and planning the next move.

There are several reasons why your repayment request may have been turned down. Most requests are commonly turned down because of too much debt. Yes, this strategy is a solution for owing too much. But there’s a limit to how big of a loan you can get approval for. This largely depends on your income. Financial institutions usually only allow this kind of loan for a monthly payment close to 40 percent of your current income. If you owe too much and the monthly payment for your consolidated loan surpasses this amount, it’s unlikely that your request would get approval.

If your income is too low or unstable, that could make you ineligible for this loan. When your debts are combined, you will have to pay a hefty monthly fee. As mentioned above, the fee should not exceed more than 40 percent of your current income. The lender expects you to pay off the consolidated loan in 3 to 5 years, which might not be possible with an income that is low. Banks also want to know if your income is steady. If you are a freelancer or a contractor without a steady flow of monthly income, you will be a less desirable candidate for one of these loans.

Credit score and credit history problems can weigh down on the final decision. It is possible to get turned down for a consolidation loan even if your credit score is good. The reason is too much debt, as mentioned above. On the other hand, if your credit score is low because you have missed multiple loan payments, this will work against you in an application. Banks are only willing to provide these loans to borrowers they can count on to meet the monthly payments. If your credit score or history indicates that you are an untrustworthy borrower, your loan will most likely be turned down.

Also, if you don’t have enough credit history in Canada, your request could be turned down. As explained above, banks want lenders they can count on. If you lack a strong credit history to show that you are a responsible borrower, a lender won’t bet on you being a good borrower.

Ask the bank or the financial institution the exact reason they turned down your request. You have a right to know the facts behind their decision.

Possible Solutions
If your request to refinance your debts failed, it’s not the end of the world. Consider these alternative solutions instead:

Mortgage Refinancing
If your application fails to go through, you can still add the debt to your existing mortgage. Basically, this is a refinancing strategy that leverages the equity (value) of your home against existing debt. You will be offering your home up as collateral when you convert other debts to mortgage debt. Meaning, the risk of you losing your home is higher. Therefore, if you do add your debts to mortgage, it’s very important to keep up with payments and have a strategy to pay it down gradually over time.

Find a Co-Signer for Your Debt Consolidation Loan
You can also reapply with a co-signer. This solution is particularly effective if your application was initially turned down because of a low credit score or bad credit history. A co-signer can provide legitimacy for an application. You should ask a friend or a relative with good credit history and little debt of their own to be your co-signer. So, even if the bank finds you unreliable, the loan could still go through if the co-signer is viewed as more reliable.

Consult with a Credit Counsellor
If all else fails, it’s time to consult with a credit counsellor or a professional financial planner. A counsellor can provide you with a list of alternatives to a refinancing method. You can also draft a long-term plan for debt elimination with the help of a counsellor. A counsellor can properly advise you on where you may have gone wrong in your previous financial plan. You may even be able to raise your credit score and reapply. Seek a debt counsellor working with your local government or a non-profit institution. Don’t fall for dubious “debt counsellors” that charge hefty fees for “advice.”

As you can see, there are still options available even if your plan is turned down. So, don’t be discouraged. You will be able to eliminate that debt. Follow the advice above and think clearly regarding your finances.

Canadian Guide to Bankruptcy and How to Avoid It

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What Is Bankruptcy?
Bankruptcy is the process someone undergoes when they’re unable to pay their debts. Legally by the time the bankruptcy has run its full course, most debts the person has collected are essentially forgiven, allowing the person to make a fresh financial start.

How Bankruptcy In Canada Works
Canada has bankruptcy laws and legislation in place to protect everyone involved in the bankruptcy as best they can. This is primarily done through the OSB (Office of the Superintendent of Bankruptcy) licensing appointed trustees to work with people through the process. These trustees work with the debtor in hopes of reaching a peaceful resolution with the creditors.income

How To File For Bankruptcy
There are several steps in the filing process you need to make, both on your own and then with the help of trusted officials. These checkpoints you go through have been put into place to help you out. Here are the different steps, with explanations, that you will go through:

Finding A LIT
The first thing you need to do is find yourself a LIT (Licensed Insolvency Trustee). These trustees will be able to unbiasedly advise you on your financial situation and what is your best plan of attack in proceeding forward.

Meeting with the LIT
Before you meet your LIT you should spend time to get as much of your paperwork gathered as possible. The more information you have to present them with at your first meeting, the better they’ll be able to advise what options are available to you. Bring along to the meeting any paperwork and financial related documents you have. This includes print outs of online accounts and online bills.

Exploring All Options
If you’re unsure bankruptcy is the answer to your woes, discussing what options you have to avoid that path is a great place to start the conversation with your trustee. They’ll be able to show you several things you can do right now to save all the unfortunate repercussions that go along with declaring bankrupt. Options the trustee should talk about include:

Debt Consolidation Loan
Debt consolidation loans offer you the ability to pay all outstanding debts off in one big chunk. Instead of having multiple lots of interest coming in each month for your various accounts, you zero all the accounts at once and instead have just one organisation to pay back. The bonus of debt consolidation loans are providing you pay them on time they have no adverse affect on your credit score.

Debt Management Plan
This lets someone take charge of all your problem finances, however unlike a consolidation loan you handle yourself, a management plan gives you instant debt relief as someone is appointed to be the middle man between you and the creditors. While it’s noted on your credit report, the advantage is you pay the trustee once a month and they pay all the individual places you owe money to.

Consumer Proposal
Although not as bad as filing for bankruptcy, this option is on your credit report for a number of years, though it does save having to liquidate your property. The trustee comes up with a discounted amount you can pay back to the creditors, if the creditors in turn agree to leave it at that amount and not harass you over previous unpaid invoices and bills.

Deciding Bankruptcy Is the Right Option
After having explored all possible financial avenues with your advisor, if you both agree that bankruptcy is the path you will take, then the time to hand over all of your finances has come. This means everything financial you come into contact with, from this point gets handed over to your advisor. This step happens so the trustee can have full transparency over all aspects of your finances, thus being able to make the best plan in going forward with your filing. The types of documents you’ll hand over include:

– Income payslips
– bills
-credit cards
-grocery receipts
-gas cards

Filing
After having handed off all your finances to the LIT, they will make the best possible arrangements for everyone involved. This includes the people who loaned you money getting paid back through liquidation of your property. After they’ve made the best possible arrangements for all parties involved, it will come time to agree and sign the paperwork.

What Happens During Filing
Filing for bankruptcy puts certain motions into play that will directly affect different areas of your life. Everything will change to some varying degree, be it daily life, your partners income or your child’s future, everyone will have unique circumstances. To help you understand the different aspects of your life that will be altered, some more significantly than others, this section has been split into three main areas to cover it in the order most people want to know about first.

1.  Your Property, Family and Belongings
While declaring bankrupt, the idea of losing all your property and belongings, as well as what happens to your relationships with friends and family, is definitely the biggest concern to most Canadians. To address it in a way most people think about it:

Your Home
Houses fall into 2 groups:
1. High Equity Home
2. New Mortgage Home
If your house has a high equity (the market value of the house minus what you owe the bank), then you will likely have to hand it over to the LIT in order for it to be liquidated. If you’ve only just begun your mortgage then you might not be required to hand it over as the equity is so low, and usually protected by Canadian provincial law up to a certain value.

Your Spouse
Unless your spouse was guarantor or co-signer on any of your debts, they will not be dragged into your bankruptcy at this point of, as debt and declaring bankruptcy is individualistic.  However when it comes time to make surplus income repayments on the debt, after you’ve filed for bankruptcy, your spouse will be indirectly affected. This is explained in more detail further down.

Your Children
If your child’s college fund is in a savings account under your name, unfortunately you will probably lose it. Speak to your LIT about all the different exemptions available in your province.

Your Belongings
A lot of provinces have differing laws on what can and can’t be collected for liquidation. Things like tables and chairs or beds, are usually the sorts of things the province doesn’t let be taken from you. Not just because their base value is already so low, but also because these sorts of objects are essential living items. However a luxury surround sound system is not considered a basic essential living item, so it would be taken and sold in order to pay back some of the money you owe.

2.  Time Bankruptcy Lasts In Canada
The actual time you’ll be bankrupt depends on your exact situation. For most Canadians it will be about 7 years. For Canadians who’ve been bankrupt before, the time will be a much longer 14+ years. This time comes from the 9 months it takes to be let-go from the bankrupt system, plus the 6 years following that where you are on record as having declared bankrupt.

3.  What Happens Financially
Declaring bankruptcy doesn’t make you immune to all your existing debts. While most unsecured debts will be wiped away, certain secured debts and financial obligations stick. These can include things like:

-Child Support, Spousal Support and Alimony
-Student Debts
-Mortgages, Car Loans
-Fines and Claims Issued by Courts

After Declaring Bankruptcy
There are still several steps you need to undertake after you’ve declared bankrupt in order to get on with your life. These steps are put into place by the courts in order to help you refrain from making the same mistakes the next time around.money-trap

Credit Counseling
The courts require you to attend a minimum of two financial counseling sessions. You should use these sessions as an opportunity to learn about what led you to bankruptcy and see what steps you can put into place to prevent it happening again.

Ongoing Commitments and Repayments
While you’re in the pre-discharge period, any surplus income you make has to be handed over to the trustee so they can pay back the creditors. This happens if your spouse’s monthly income, plus your monthly income, are deemed by the OSB as being higher than the amount needed for you to maintain a reasonable standard of living. Anything you make above that reasonable standard of living amount will go to the creditor.

Leaving Bankruptcy Behind
Getting discharged from the bankruptcy is the final step in the process. If it’s your first time being bankrupt this discharge should happen automatically after about 9 months from the date you filed the paperwork. Sometimes you’ll find your situation needs monitoring more closely and can take longer than 9 months if the courts are not satisfied. This can happen because of your failure to comply or your situation changing and includes things like:

-Not receiving financial counseling
-Earning a higher income
-Failing to make payments

If you’ve done everything that’s been asked of you and participated to your best ability with both the LIT, the courts and creditors, and the courts are happy, you will be granted the discharge.

Debt Consolidation Strategies for Canadians

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If you have a heavy debt load, you probably have money problems, poor or average credit, and a history of missed or late payments, maxed out credit cards, foreclosures, or other serious problems.

Add the Debts to Your Mortgage

One way to consolidate existing balances is to add them to your mortgage and lower your monthly payments. To begin with, mortgage loans come with attractive interest rates because your home guarantees repayment. Consolidating high-interest balances such as credit card balances can save you thousands of dollars in charges. If you have two or more cards with rates of 16 – 20 percent and add them to a mortgage loan with a rate of 4.5 – 5 percent and a term of 30 years, you will save some $10,000 on a mortgage balance of $200,000 and $20,000 in card balances. Adding debts to your mortgage has advantages provided that you have enough equity. What is more, there are flexible options to choose from, depending on your financial situation. You can choose from different financial solutions such as home equity line of credit, home equity loan, or refinancing. Refinancing is usually offered to borrowers who are looking for ways to deal with high interest rates. Customers benefit from a structured repayment plan and the opportunity to budget and plan their payments. Another benefit is the fact that there is a fixed pay-off date. The two other options are a home equity LOC and loan so that you benefit from a lower rate of interest. In this case, the equity you have serves as a guarantee or security, and you will be offered a higher credit limit compared to other unsecured options. Another advantage is that you have a single bill to pay which means a single creditor to deal with. This makes payments more manageable and easy to remember because there is only one due date. If you have multiple balances and different due dates, you are more likely to be late on your payments or even miss one or more payments. In this case, your creditor may charge a higher (penalty) rate which will increase your balance and monthly payments. A lower rate, on the other hand, will help you to repay your balance sooner. What is more, if you opt for a home equity line of credit, you are free to draw on the line up to the available limit and make interest-only payments. As an added benefit for borrowers, they are offered an ongoing access to cash at any time.

Get a Debt Consolidation Loan

Debt consolidation loans are offered by many online services, banks and other issuers to combine multiple balances in a single account with affordable monthly payments. The interest rate is usually lower and results in reduced payments. This is one alternative to consumer proposal and credit counseling that helps borrowers to repay outstanding balances over a period of 5 years on average. There are several things to check, however, one being the amount of monthly payment. If it is less than what you pay on your card balances, then consolidated credit will help you to repay your debts. Other consumer options and alternatives to consolidation include debt relief and settlement. The first option involves negotiation with one or more creditors to secure a reduced interest rate and a lower monthly payment. Alternatively, the creditor and borrower may agree to reduce the principal amount with the goal of lessening the total debt load. Debt relief is also an alternative to consolidation whereby the creditor grants debt forgiveness for a portion or the whole debt of the borrower.

There are other options to consider, two being debt restructuring and forbearance. The former involves refinancing while the latter may be offered in the form of a split mortgage. There are other types of forbearance to consider, including interest only, reduced payment or repayment, a moratorium on payments due, and a lower loan rate. As a rule, forbearance is an option usually offered to borrowers who experience short-term or temporary financial hardship. Such customers are also offered negative-amortizing loans to make it easier to keep up with payments.

Many banks and online services offer free advice on debt consolidation and will offer a product that suits your circumstances. They will discuss your financial situation to advise you on whether it is a good idea to consolidate your debts.

Borrow from family and/or friends

Obviously, this is an option if your parents, family members, or friends are willing to help you out to make a prepayment. If they are in debt, unemployed, or in financial hardship, then you may want to look for alternatives. Ask friends or family for a loan only if you are sure that you will be able to pay them back. You can sign a contract and agree on a term of repayment and interest rate or you can ask for a no interest loan if you are close enough. In any case, there are risks involved that may sour your relationship with a family member or a close friend. If you lose your job, for example, and are unable to find a well-paid job or you get demoted, you may find it difficult to make timely payments. It is wise to ask for a small loan to cover a portion of your outstanding balance. Try to live within your means, save, cut on some expenses, find a well-paid or second job, and shop around for alternatives.

Talk to a Credit Counselor

Credit counselors offer professional advice to heavily indebted borrowers and teach them about budgeting and finance management. Credit counseling certainly helps develop healthy financial habits and avoid debt in the future, including subprime and bad credit loans. Credit counseling is beneficial in that borrowers are offered access to free workshops and educational materials. There are additional benefits for customers, whether they choose for-profit or non-for profit counseling. One is that borrowers pay a lower amount and enjoy the fact that additional charges and late fees are eliminated. Customers are free to choose from different types of services, including traditional and online counseling, the latter being a convenient way to place your finances in check from the comfort of your home. Traditional counseling, on the other hand, takes the form of on-site sessions to go in depth and learn more about personal finance. Whatever form you choose to attend, there are multiple benefits such as the opportunity to rebuild your credit score and the fact that you can transfer big bills into a single one. What is more, the harassing calls from collection agencies will be a thing of the past.

Other Debt Consolidation Strategies

The choice of a financial tool depends on the amount and type of debts you have, i.e. student loans, consumer loans, credit cards, etc. If you mostly have high interest credit card debt, you may want to shop around for a no or low-interest card to transfer and consolidate your balances. Customers who choose to do this usually go for a low rate card with a long promotional period. The promo period varies from bank to bank and can be as long as 18 months. Most issuers offer balance transfer cards with a promotional period of 6 – 12 months but it pays to shop around. Ask about the interest rate after the promo period, the penalty rate for late payments, the balance transfer fee, grace period, and other details.

Finally, bankruptcy is an alternative to debt consolidation but it is also a last resort because of the long-term negative effect on your credit score and financial situation. Your credit score will plummet and many banks will be unwilling to approve your loan or credit card application because you are a high risk borrower, especially if you have a previous history of foreclosures, delinquencies, and other major credit problems. Financial counselors recommend bankruptcy in case you have many unsecured loans, including credit cards and unsecured consumer loans. In this case, your debt will be wiped out and you can start anew. If your debt load is manageable by other means, it is recommended to try other options such as consumer proposal and debt consolidation.

Debt Consolidation Loans

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Consolidation helps heavily indebted borrowers to reduce their debt burden and repay all outstanding balances faster, making payments more manageable and easier to keep up with.

What Is Debt Consolidation

Consolidation is an alternative to bankruptcy and a form of refinancing, the ultimate goal being debt relief. This is a process that combines two or more debts into a single balance to reduce the payment or interest rate. This is one alternative to consumer proposal that helps borrowers manage credit card, consumer, student loan, and other types of debt that are not tied to a guarantee or collateral.

How Does Debt Consolidation Loan Work

Debt consolidation loans are usually unsecured but there is an option to add outstanding balances to your mortgage provided that there is enough equity. The main difference between both is the fact that your home serves as collateral. Another difference is that mortgage debt comes with a lower interest rate and again, this is because financial institutions perceive you as low-risk because of the asset pledged as collateral.

Who Offers Debt Consolidation Loans in Canada

stampThere are many major, regional, and small banks that offer debt consolidation in the form of personal loan to combine high-interest balances. Major financial institutions such as TD Canada Trust, the Royal Bank of Canada, and others offer consolidation loans to their customers. RBC, for example, offers the option to use a loan or line of credit to consolidate two or more loans and credit cards to benefit from a reduced interest rate. There are also reputable services that offer professional advice on debt and personal finance.

Consolidated Credit Counseling Services of Canada

Consolidated Credit Counseling Services of Canada has helped many customers to reduce and eliminate their debt burden. Customers are offered different debt solutions and financial advice on marriage and money issues, planning for retirement, ways to rebuild and build credit, how to consolidate and manage debt, and a lot more. The goal is to help customers to improve their financial literacy and avoid excessive debt. Free debt analysis is offered online as an added benefit.

Credit counseling is one option to deal with excessive debt and learn how to manage debt and your finances. Borrowers benefit in many ways, one being the fact that they are able to pay off their bills and credit card debt and increase their credit rating. What is more, penalties and late fees are eliminated, and customers save thousands of dollars in charges and interest. Borrowers who opt for consumer proposal work with trained and certified professionals, and counseling is usually confidential and free. This is also an option to avoid bankruptcy and an alternative to debt restructuring, negotiation with creditors, and other solutions. Borrowers no longer receive multiple calls from financial institutions and enjoy an affordable monthly payment. They are offered debt management and budget information for free and learn how to cope with stress.

approved-markCounselors at the Consolidated Credit Counseling Services offer advice on different debt management programs and the first step is to assess your financial circumstances. To be able to do this, they need information such as your total outstanding debts and monthly income, interest rate on all cards and outstanding loans, and additional expenses such as gas, insurance, mortgage or rent, and other expenses.

Credit Canada Debt Solutions

Professional services are offered to borrowers, including online debt assessment and financial advice. Customers learn more about finance management and debt management programs. Working with a financial coach is a great way to learn about financial planning and benefit from a host of money management tools.

  • Review your budget to make sure a program is right for you – There is a large selection of debt solutions, with credit counseling as one option whereby the borrower meets with a counselor to discuss his debts, assets, expenses, income, and financial situation in general. The counselor reviews indicators such as debt to income ratio, credit rating, and others. This helps counselors to find the best solution based on the customer’s financial circumstances. Debtors learn how to choose from different financial solutions and how to use credit cards.
  • Work with your creditors to reduce or remove interest – Working with a professional is one way to remove interest or benefit from reduced interest. Lower interest means reduced monthly payments, and paying more toward the principal balance which allows borrowers to repay their loan faster.
  • Set your monthly payment at an amount you can afford – Obviously, reduced interest means monthly payment you can afford to make so that you have enough money for basic necessities such as food, rent, and utilities.
  • Teach you about budgeting and setting financial goals – The good thing about counseling is that borrowers are offered helpful information that enables them to set financial goals and review their budget. Customers learn how to keep their spending under control to achieve short-term and long-term financial goals.

Credit Counseling Society

approvedThe Credit Counseling Society offers debt help and tools to use credit in a wise manner and avoid major debt problems. Customers learn more about debt settlement and debt consolidation as well as alternatives such as bankruptcy and consumer proposal.

The Society also offers referral services and advice, budgeting assistance, money management education, and more. Customers benefit from professional non-judgmental and confidential services free-of-charge.

Benefits of debt consolidation loans

Debt consolidation loans offer multiple benefits to borrowers who are struggling with debt – from the opportunity to rebuild credit to avoiding bankruptcy.

  • Stop harassing collection calls – Collection agencies can be annoying to deal with when you are unable to make payments. A debt consolidation loan is one solution to your financial worries and a way to stop harassing calls.
  • Improve your credit – Being able to make regular payments on time helps build a healthy score over time. A good credit score and payment history opens many doors because financial institutions consider you a trustworthy borrower.
  • Avoid bankruptcy – Bankruptcy takes different forms and is usually the preferred option of borrowers with unsecured loans who experience major financial difficulties. This is a serious financial decision that will affect your credit and ability to access financing in the future. Credit counseling helps borrowers to avoid bankruptcy through different settlement, repayment, and consolidation programs.
  • Reduce or eliminate interest charges from credit cards – Debt consolidation is a good way to benefit from a reduced interest rate on credit cards. What you can do is transfer existing balances with high charges to a card with a low promotional rate. Such balance transfer cards are offered by many big and local banks with a promotional period of up to 18 months.

There are other benefits to debt consolidation – this is a way to simplify your finances and streamline payments. What is more, this is an unsecured loan meaning that you don’t risk losing your home or another valuable asset pledged as collateral. The main downside is that unsecured loans come with a higher interest rate because they involve more risk than unsecured loans.