In the most recent annual BC Consumer Debt Study undertaken by Sands & Associates, roughly 30% of indebted consumers polled said they waited to seek professional debt help because they didn’t know where to seek it – and over 35% of people who later found relief by filing personal bankruptcy or a Consumer Proposal said they delayed seeking help because they had thought there was no solution to their situation.
With consumer insolvency filings poised to rise significantly as courts reopen and payment deferrals expire, BC Licensed Insolvency Trustee Blair Mantin joined CTV News Vancouver to share some key points for consumers to understand when it comes to dealing with debt, and debt consolidation options in particular.
Watch the clip here and read more below:
Debt Help Services and Consolidation Options
Impacts on British Columbians Struggling with Debt
Sands & Associates, BC’s largest firm of Licensed Insolvency Trustees focused exclusively on debt help services for individuals asked consumers across the province (who had ultimately chosen bankruptcy or a Consumer Proposal to deal with their debts) for insights into how their debt had impacted them before finding a solution.
Along with ‘only making minimum payments’ and ‘accumulating more debt’ – ‘overwhelming stress’ was one of the top indicators for study participants that their debts were becoming a problem.
While the vast majority of British Columbians polled stated that they had felt worry or stress about their finances in some way, the severity of debt-stress impacts was striking:
- Nearly 90% said they experienced a constant or daily worry about their debts or general finances.
- Over 70% said their self-esteem suffered as a result of being in debt, and 65% said their health suffered; many also felt their family or children, and even jobs suffered.
- Anxiety or depression was cited as a debt-stress impact by 77.1% of respondents.
- Nearly 1 in 5 respondents said the stress of debt resulted in them experiencing thoughts of suicide.
If you are feeling debt-stress or worry about your finances know that you are not alone. Professional debt help and non-judgmental support is available to you and there are options that can assist you in clearing your debt and getting a financial fresh start.
Why Choose Debt Consolidation?
Debt consolidation is an option many people consider to get control over their credit card debt as well as other consumer debts that are becoming unmanageable. There can be significant advantages to streamlining debt payments, particularly if you are juggling multiple debts at the same time.
- Debt consolidation normally means simplifying since you will make a single (usually monthly) payment to cover all your debts instead of making multiple payments.
- By combining multiple debts into one combined payment you’ll also be paying one, typically lower, interest rate (depending on the type of consolidation used), instead of having varying costs of borrowing spread across multiple debts (credit card debts in particular can be high-interest).
Debt consolidation can be achieved a few different ways in Canada and there are pros and cons to each consolidation type to consider. Under some debt consolidation plans interest charges can be eliminated, and even the amount of debt you owe can be reduced to a more affordable level.
Key Debt Consolidation Options for Credit Cards and More
Bank Loans / Financed Debt Consolidation
With traditional bank consolidation a lender will pay off your individual debts and roll the combined balance into a new loan that you will repay – with interest.
Pro: The interest rate will (usually) be lower than what you are currently being charged on your existing debts (i.e. 12% per year instead of perhaps 20% per year).
Con: Lenders often want you to meet qualifying terms for consolidation financing such as:
- Having an asset that can be used as collateral for the loan (such as a vehicle, or even your home).
- Getting a co-signer to guarantee the loan in the event you are unable to make your payments.
- Requiring you to have a high income and/or high credit rating.
Many people simply do not qualify for traditional bank consolidation loans. If you do qualify, be sure that you can afford the payments needed and think seriously before asking a co-signer to share responsibility for the debts. As Licensed Insolvency Trustees we meet with many people who were able to obtain a consolidation loan but ultimately found their monthly payments unaffordable and need to seek a further solution.
Credit Counselling Debt Management Plans
Debt counsellors and non-profit credit counsellors will offer to make arrangements with your creditors for you to pay off your debts in full. The counsellor will coordinate a repayment program between you and your creditors for debts that are eligible for participation in the consolidation, which may not include all debts that you owe.
- Most creditors who agree to participate in a credit counselling program will also agree to stop further interest charges, so if ALL your debts are consolidated this can make your monthly payments lower than by borrowing to consolidate.
- Your credit rating is not a qualifying factor.
- Not all creditors will accept traditional OR non-profit credit counselling plans (government debts, for example, cannot be settled or reduced this way). Creditors who do not agree to your plan will need to be paid separately.
- Credit counselling organizations are heavily bank-funded and some are registered as collection agents, creating a potential conflict of objectives / conflict of interest.
- Unregulated fees and other miscellaneous charges are typically charged by the counsellor/agency in order to perform their service – meaning that you will repay 100% of your debt without interest, plus added professional fees (even if you are working with a non-profit agency).
Consumer Proposals are a legal debt consolidation arrangement made with your creditors that allow you to repay only a portion of your consolidated debts, in full settlement – without borrowing. A Licensed Insolvency Trustee will work with you to tailor an offer to your creditors that fits your household budget and personal circumstances.
- Debts can often be reduced by 50-70% or more in full settlement.
- Interest and collection action are automatically stopped on the date of filing (without needing negotiation).
- Virtually all types of debts can be consolidated, including credit cards, tax debt, student loans and more.
- Credit ratings are not a factor to qualify for a Consumer Proposal consolidation.
- No additional administration costs are payable on top of what you pay under the Consumer Proposal – this is due to Licensed Insolvency Trustee professional fees being tariff-based and set by the government.
- You must work with a Licensed Insolvency Trustee to file a Consumer Proposal; it is not a solution you can access on your own.
- Licensed Insolvency Trustees are the only debt help professional who can help you make a Consumer Proposal.
- Much like credit counselling programs, there is a short-term 3-year notation on your credit history.
When to Consider Professional Debt Management Options
Licensed Insolvency Trustees are the only government-regulated and endorsed debt help professionals in Canada and a Licensed Insolvency Trustee can help you assess your situation and evaluate your options at virtually any stage and no referral is required to connect and get free debt advice.
There is no qualifying threshold to book a free confidential consultation with a BC Licensed Insolvency Trustee, whether you want to simplify or reduce your monthly debt payments, are concerned about your ability to continue making your debt payments short or long-term, or are already experiencing signs of debt-stress or serious collection activities such as wage garnishments.
If consolidation or other formal debt management solutions are not necessary to resolve your situation, we can help you learn about additional resources that can help you effectively manage your debt. Knowing is not owing!
Connect with a BC Licensed Insolvency Trustee from the comfort, convenience and privacy of your own home. Book your confidential free debt consultation and get started with a debt-free plan today!