While searching for ways to help you with debt, you will come across a lot of different options. You want to find the right solution for you and your family, but with so many to choose from, it can become a confusing process. To help you make an informed decision about managing your debt, we have provided an outline of available methods for debt relief, and what they could mean to you.
We understand that before seeking professional help, you might want to learn more about how you can develop a plan to pay off your debts on your own. We offer free financial tools like a budgeting worksheet and debt calculator to help you get a sense of your financial situation first.
Creating a household budget can be a useful tool for determining how much of your income goes to different types of expenses, from paying your bills to entertainment costs. It will also indicate how much you could potentially set aside to put towards your savings or debt repayment. Use our budgeting worksheets to start tracking your payments.
Paying down debt can sometimes feel like you’re on a hamster wheel, spinning around in circles. By using a debt calculator, you’ll have a good idea of how long it will take to pay off your debt. You can enter the amount of debt you owe, the interest rate you pay and your current monthly payment, to find out the total amount you will owe, including interest, and how long it will take to pay off. Try using BDO’s debt calculator today to see how long it will take to pay off your debts after doing some budgeting.
After you create a budget and know how much you will have to pay down your debts, use this debt options calculator to see how much each debt solution will cost you each month. You will be surprised at how they differ and this can help improve your budget.
We realize that you may already be struggling to maintain your monthly debt payments, and feel you could use more help than budgeting and self-help methods to regain financial control. We’ve listed the following repayment options for debt control so that you can find out more about how to manage your debt:
A debt consolidation loan allows you to repay multiple loans through one payment at a lower interest rate. For example, if you have debt on three credit cards at 18% interest, you may be able to consolidate these debts into one payment with a line of credit at 11% interest. This reduction in interest rate allows for more of your monthly payment to go towards paying down the money you owe, instead of interest, allowing you to pay off the debt faster. You might qualify for a consolidation loan if you are working or have a source of income to enable you to repay it.
Keep in mind that qualifying for a consolidation loan might not be possible for everyone. A bank will take into consideration your total debt load, percentage of credit used and history of making minimum payments. Depending on how you rank in these areas, your credit score may already be impaired, preventing you from qualifying for a consolidation loan. But, a consolidation loan is still only one of the many options available to help you repay your debt.
A debt management plan (DMP) is a proposal made to your creditors by a credit counselling agency. The credit counsellor will negotiate with each of your creditors to agree to reduce the interest on your debts. You will then pay back 100% of your debt to the credit counsellor at the lowered interest rate, and the counsellor distributes your monthly payments to your creditors.
A debt settlement plan is offered by companies who indicate that they will negotiate an agreement between you and your creditors to settle your debt for less than what you owe. You will enter into a contract with the debt settlement company to start paying them a monthly sum of money, and you will stop making any interest or principal payments to your creditors.
Your payments go to the debt settlement company to build up a lump sum amount in a holdings account, which can take several months. During the process of a debt settlement plan, you won’t be making payments to your creditors, in order to encourage them to come to a settlement with the company representing you. Unfortunately, this lack of payments can lead to a worsened credit score.
As well, because these firms are not licensed debt professionals, many creditors refuse to accept their settlement plans. You would then be making payments to the firm, which they will retain, but you will not have achieved a solution to your debt problem.
A consumer proposal is a proposal made to your creditors to pay back only a portion of the debt owed, rather than the full amount. It stops all legal action taken against you like a wage garnishment or a lien on your home, and protects you from harassing phone calls from creditors. Only a Licensed Insolvency Trustee (LIT), as an Officer of the Court, can implement this legitimate debt solution to protect you.
You can learn more about the consumer proposal process by visiting our Consumer Proposals page.
Bankruptcy releases you from most, if not all your debts, meaning you will not have to pay them back. Similar to a consumer proposal, bankruptcy stops all legal action taken against you and can only be administered by a Licensed Insolvency Trustee. It protects certain assets that creditors may otherwise be able to take. We only consider bankruptcy after exploring all your other options first. However, for some individuals, it can be the most efficient solution for regaining financial stability.
You can learn more about the bankruptcy process by visiting our Bankruptcy page.
If you have questions and would like one of our local debt professionals to personally explain how each option applies to your situation, you may contact our office and set-up a free assessment with no obligation.