Managing your consumer debt in St. John’s can often be difficult, especially when you take on too much to handle via conventional methods. Coming up with the right debt relief solution can also be a challenge in St. John’s, where consumer debt levels have been steadily on the rise in recent years. That said, it can be done, as long as you’re willing to put in the work needed.
A debt settlement is a popular method that many St. John’s residents use to do just that. Wondering if this would work well for your situation? Keep reading to find out.
Are All Debts Eligible for Settlement in St. John’s?
Before we go any further, let’s make sure that your debt is actually eligible for coverage under a debt settlement in St. John’s. This is a very important thing to ask a financial advisor about when looking into the process because, generally speaking, your debts cannot be “secured” in order to qualify.
Secured debt refers to any kind where you offered collateral as security when you applied. This common practice with larger loans and other more expensive credit products, where added risk is imposed on the lender. Using one of your assets (vehicle, house, etc.) as collateral is one of the best ways to secure a sizeable amount of credit and a favorable interest rate, especially if you don’t have strong finances. Many debts from legal or government-related sources must also be excluded.
On the other hand, unsecured debt, that doesn’t have collateral attached, will be eligible.
Eligible Debts
- Unsecured loans (installment, short-term, bad credit, etc.)
- Unsecured lines of credit
- Credit cards
- Bills unrelated to credit (cell phone, internet, utilities, etc.)
- Medical costs (hospital fees, voluntary surgeries, etc.)
- Non-government student loans
- Payday loans
Ineligible Debts
- Secured loans and lines of credit
- Home equity loans and lines of credit (HELOC)
- Legal judgments (fines, lawsuits, alimony payments, etc.)
- Government student loans (federal)
- Mortgages
- Vehicle loans
Read this for more information about secured and unsecured debt.
Do you know what the true cost of borrowing is? Click here to learn more.
How Does Debt Settlement Work in St. John’s?
Debt settlement is a possible deal that you can work out with the lenders you owe money to. It allows you to pay a substantial portion of your outstanding balance, instead of the full amount that’s due.
The deal can only happen if you’re able to prove that you cannot afford your whole balance. You should, therefore, provide recent bank statements, pay stubs, and other related evidence when you meet with your lender to discuss the situation. If your proof is sufficient, the settlement can go through. After all, most lenders would prefer to regain some of what they lost, rather than bring you to court, where any legal fees might outweigh the amount that you actually owe.
Need a few debt management tips? Check this out.
How Can a Debt Settlement Be Arranged in St. John’s?
Once you and your lender have agreed on a reduced balance, your dues will typically need to be paid back in a single payment. There are two different methods of doing this. Since both methods can affect your financial profile in various ways, it’s important that you choose the one that is the most appropriate for your financial situation.
A Debt Settlement Company in St. John’s
There are plenty of borrowers in St. John’s who would prefer the help of a professional when attempting to settle their debts. Negotiating with a lender alone can be stressful and won’t always work out, particularly for those who aren’t experienced and need someone to speak up on their behalf. If that’s the case for you, hiring a debt settlement company in St. John’s can be the right strategy.
Check out these questions you should ask your debt settlement company.
Considerations to make:
- Professional help won’t come free. On top of your large payment, you’ll also have to pay fees for the company’s services. This can include a base price, administrative charges, taxes, and other costs that would affect your budget.
- Debt settlements are not bound by legal restrictions. Even if your lenders agree to the deal, they aren’t required to cease their collection efforts against you.
- Scam artists can tell when you’re desperate for debt relief and may use that knowledge against you by stealing your money, financial information, and even your identity. Be extremely cautious around any supposed debt settlement company that doesn’t have a good reputation and confirmable credentials.
Not sure if you’re a victim of identity theft? Read this to know.
Solo Debt Settlement
If you have some negotiation skills up your sleeve, you can also attempt to strike a debt settlement on your own, which might be better if you can’t afford or don’t want to deal with the added risk that comes with hiring professional help.
Considerations to make:
- You must be able to provide sufficient proof of your inability to pay your entire outstanding balance. Without qualified backup in your corner, some lenders may be less receptive to negotiation.
- Lack of professional help can lead to an increased chance of legal troubles if your solo settlement is not acceptable. Any costs involved could be too expensive for you to handle. You might then be stuck with multiple debts, causing even further financial problems for you.
Learn how to negotiate your own debt settlement, click here.
When is Debt Settlement Your Best Option in St. John’s?
Depending on your current financial situation, a debt settlement might not even be the most appropriate debt relief option for you in St. John’s. Remember, lots of careful consideration and research should factor into your final decision. That said, it’s best to act swiftly before things take a turn for the worst.
A debt settlement may be the best course of action in St. John’s when:
- It’s impossible for you to manage your debts using typical payment methods.
- You’re having a lot of trouble keeping track of all your debt sources, due dates, interest rates, and penalties for defaulting.
- You wish to lower your debt-to-income ratio and fix your credit health.
- You’re comfortable with the settlement showing up on your credit report and lowering your creditworthiness temporarily following completion of the deal.
- The one-time payment you’ll be required to make is not out of your budget.
Want to create a plan of action to tackle your debt load? Check out this infographic.
Are There Any Alternatives in St. John’s?
If you’ve determined that a debt settlement in St. John’s is not actually the best course of action, there are a few alternative solutions. Again, be sure to talk to a financial advisor in St. John’s before attempting any, as some of them will affect your credit and finances more drastically than others.
Less Drastic Alternatives
- Borrowing money from family members or trusted friends
- Getting a guarantor loan
- Withdrawing from your home equity
- Attending credit counselling sessions
More Drastic Alternatives
- Applying for a debt consolidation loan
- Going through a debt consolidation program
- Filing for a consumer proposal
- Declaring personal bankruptcy
Is a Debt Settlement in Your Future?
If you’re interested in seeking assistance with a debt settlement in St. John’s, Loans Canada can help. Together, we can work out a solution to your debt problems.
