Debt is often necessary in New Brunswick, in order to make large purchases; after all, it’s difficult for consumers to have huge lump sums of money available to make purchases such as homes and cars without taking out some type of loan.
But when that debt becomes so overwhelming and excessive that it becomes nearly impossible to pay down the outstanding balance, that’s when there’s a serious problem. If you live in New Brunswick and are drowning in debt, you may find that debt settlement is the solution you’ve been looking for.
Can you negotiate debt settlement on your own? Click here.
How Does Debt Settlement Work in New Brunswick?
In New Brunswick, a debt settlement program works by having a third party – the debt settlement company – negotiate with your creditors on your behalf. By negotiating, your debt settlement representative will try to convince the creditors to reduce how much you owe them.
Debt settlement companies in New Brunswick are well-versed in getting creditors to view your situation more favourably and are more likely to get more ideal debt reduction offers from your creditors than if you were to try and negotiate yourself. Depending on various factors, you could reduce your outstanding principal by anywhere between 20% to 80%.
Will Debt Settlement Affect Your Credit Score?
The way in which debt settlement will affect your credit score depends on your specific situation. Ideally, your creditor will reduce your debt amount by quite a bit when settling your debt, since this will have less of an impact on your credit score. That said, your representative will work on your behalf to try to provide the most ideal offer for your credit score.
Think about it this way: if you have so much debt that you are unable to make your payments on time or in full, this will negatively affect your credit score. But if you can whittle down your debt load so that you can comfortably make payments and eventually be void of much debt at all, this can be good for your credit.
Interested in how your credit score is calculated? Check this out.
Who is a Suitable Candidate For Debt Settlement in New Brunswick?
Debt settlement might not necessarily be for everyone, but it may be ideal for some New Brunswick consumers in the following situations:
- Have at least $10,000 in unsecured debt
- Can’t afford minimum monthly credit card payments
- Falling behind on payments
- Looking for an alternative to bankruptcy
- Unable to make any financial progress
- Experiencing financial or personal hardships
Click here to learn more about qualifying for debt settlement.
Secured Vs. Unsecured Debt
Debt settlement is designed to alleviate debt that is unsecured. It does not usually deal with secured debt. But what is the difference between the two?
Examples of secured debt:
- Mortgages
- Auto loans
- Title loans
Basically, anything that is secured by collateral is considered a secured loan and is not covered by debt settlement in New Brunswick.
Examples of unsecured debt:
- Credit cards
- Personal loans with no collateral
- Student loans
- Payday loans
- Medical bills
Basically, anything that is not backed by collateral is considered an unsecured loan and may be covered by debt settlement.
What Can You Expect From Debt Settlement in New Brunswick?
With a debt settlement program, you will work with a representative who will assess your situation and all of your loan types. Your financial situation will also be factored in to see what you will realistically be able to afford.
The settlement company will make sure you have enough for a lump-sum offer, after which they will negotiate on your behalf with your creditors to see if they are willing to reduce your overall debt load. Your interest rate may also be the subject of negotiation.
Take a look at this infographic to learn how you can create a debt repayment plan.
Pros and Cons of Debt Settlement in New Brunswick
The advantages of a debt settlement program are obvious: it will help you reduce your overall debt amount and provide you with the support you need to pay back your debt and start living the debt-free life you want.
Further, your debt-to-income (DTI) ratio can be reduced, which can help with your credit score. You can put a stop to all those late payments, as well as any collections calls that your creditors may have sent after you.
But along with the pros of debt settlement comes some cons as well. For starters, debt settlement will show up on your credit report, which can scare off any future lenders in New Brunswick from approving your application for a loan.
In addition, there’s always the risk of accumulating more debt if you’re not careful. That said, this is always a risk factor with just about any other debt relief programs.
What Are the Alternatives to Debt Settlement in New Brunswick?
If you don’t believe that a debt settlement program is the way to go, you have other options, including the following:
Debt consolidation – This involves taking out a new loan to pay off several smaller loans. By doing so, you can combine all of these debts together into one loan with one monthly payment and a lower interest rate.
Credit counselling – This type of program involves helping you through education, proper budgeting, and using different tools to ultimately reduce and eliminate debt altogether.
Consumer proposal – This is an arrangement that is negotiated with your creditors. Through the preparation and submission of a consumer proposal (with the help of a Licensed Insolvency Trustee, more information here), you agree to pay part of what you owe your creditors, who may then agree to forgive your debt.
Bankruptcy – This is the last resort if you’ve exhausted all other options in New Brunswick. In bankruptcy, you surrender many of your valuable assets in exchange for being free of much of your debt. Your credit report will be affected for approximately 7 years, during which time it will be difficult to take out any other credit.
Is a Debt Settlement in New Brunswick Right For You?
If you think that debt settlement can help you with your financial woes in New Brunswick, Loans Canada can help! We’ll match you the right debt relief program to meet your needs.
