A lot has been written about strategies to get out of debt, plan a budget, and stick to it. If you want to be one of those success stories of people who have clawed their way out of debt on their own, that’s great. If you’re digging out of a particularly deep hole, or your shovel is disproportionately small, you may quickly realize that getting out of debt on your own is an all but impossible task.
As calls from creditors start harassing you at all hours of the day and you watch your monthly statements steadily increase, it may seem as if bankruptcy would easily solve all your problems.
This is rarely the case, so today we’re going to talk about the range of professional options available to you. In Canada debt program options include: Credit Counseling, Debt Consolidation Loans, Debt Settlement, Consumer Proposals, and finally, when all else has failed, Bankruptcy.
- Credit Counseling
A professional brings years of experience, a greater knowledge of your options, and, most importantly, a non-biased approach to your finances. They’ll help you examine your income and expenses and come up with a short and long-term plan to get you out of debt and keep you out.
This may also include negotiating with creditors in an effort to reduce the amount of interest you pay, lowering the monthly payments to make them more manageable, and lengthening the deadline for payback.
One thing credit counseling won’t help with is actually reducing the amount you owe. That’s fine – you DO owe the money, but if you’re truly in trouble, you might need a more drastic option.
- Debt Consolidation Loans
Debt consolidation takes all of your debts and pays them off under a single loan. That loan is now your only debt. This is incredibly helpful because you’ll only have one monthly payment, which is easier to track, plan for, and pay on time. It’s also possible to negotiate a lower overall interest rate. On top of all that good news, you can also lower your monthly payment to something you can manage more easily.
The drawback to a lower monthly payment is that it could end up taking longer to pay your debt consolidation loan off than it would just paying your debts back.
- Debt Settlement
Hiring a debt settlement specialist to negotiate your debts might be the best decision you can make. By speaking to each of your creditors, they’ll work on your behalf to lower the total amount you owe, lower interest rates, and set up comfortable monthly payments.
- Consumer Proposal
Despite it’s rather passive name, this is an official agreement between you and your creditors to settle your unsecured debts. You’ll work with a licensed bankruptcy trustee, and this option is pretty much the last step before bankruptcy and WILL negatively affect your credit score and borrowing ability.
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