With Metro-Vancouver, including Richmond, being home to some of the largest debt-to-income ratios in all of Canada, it is no surprise that many people are struggling financially. Holding a lot of debt over a prolonged period of time is not easy. Not only that, but it can make any financially-related goals much harder to reach.
While many people will make enough to be able to get out of this trouble, countless others will not. For these people, bankruptcy might be something they need to consider in the future.
Research Your Pre-Bankruptcy Options
However, before you choose bankruptcy as your preferred debt relief option, there are some other options you should consider first. See, bankruptcy is an extreme debt relief solution and should only be used in very serious cases where you see no other way out of debt. These less severe options that you can consider include:
Debt Consolidation Loan
A debt consolidation loan is when a person takes out one large loan to cover all of their smaller loans. This is usually done to simplify the monthly payments a person makes, so they will only make one payment each month instead of multiple.
A debt consolidation loan can also help you get a better interest rate. In addition to a debt consolidation loan, a debt consolidation program could also be a better choice. This product is helpful for those who want the same benefits of a consolidation loan, without having to borrow additional money.
Read this to learn the benefits of a debt consolidation program.
A debt settlement is when you make an offer to your lenders to settle your debt for less than the total amount. So if you owe $10,000, you might offer to settle for $6,500. This will save you money, but will also give the lender something, which is better than getting nothing. Of course, your lender isn’t required to accept, so make sure your offer is a fair one.
If you’re looking for a debt settlement company, be sure to ask them these questions.
While credit counselling is often used to improve credit, it can be attended by anyone who needs financial help in Richmond. You will work with a credit counsellor and the two of you will come up with a plan of attack before deciding whether bankruptcy is your only option. This could be coming up with a new budget, identifying other issues or even utilizing one of the aforementioned debt relief solutions.
Click here to see more ways of improving your credit score this year.
A consumer proposal is the second most extreme solution behind bankruptcy. While it is serious, it isn’t nearly as harsh on your credit as a bankruptcy. A consumer proposal is where you will work with your lenders to pay back a portion of what you owe or extend how long you have to pay them back.
How Does Bankruptcy Affect Your Credit?
If you feel that bankruptcy is the only option that will work for you, you should be aware of how it will affect your credit and overall financial situation. In general, bankruptcy will have a negative effect on your credit. There will be a note on your credit report for nearly 7 years after your first bankruptcy, and for 14 years after your second.
Wondering how much it would cost you to declare bankruptcy twice? Find out here.
This will make it difficult to secure new loans and the loans you can get will often have high-interest rate and low-quality terms. So be sure to consider all of this before filing, as it will follow you around for years and years. While the damage to your credit can be large, sometimes it’s better to start from scratch with a clean slate as opposed to simply living with excessive debt.
Check out this infographic to learn more about what affects your credit score.
How to Repair Your Credit After Bankruptcy in Richmond
So while bankruptcy can negatively hurt your credit, sometimes that isn’t such a bad thing. However, once the bankruptcy is final, you will want to work quickly to ensure you can get your credit back in a good place. Thankfully, there are several different tips to help you repair credit after a bankruptcy. These include:
- Pay all of your bills on time and in full, do not miss any payments
- Understanding all of the factors that go into a credit score
- Build up your savings as best as possible to avoid this happening again
- Change your financial habits to be more responsible
- Consider getting a secured credit card to build credit without the risk
While these won’t fix your credit overnight, if you are serious and dedicated to improving your credit, you will start to notice improvement quicker than you might think.
Click here for a more detailed page about credit building after bankruptcy.
Is Bankruptcy Your Best Option?
Thinking about filing for bankruptcy? If so, be sure to contact Loans Canada. We can help make sure it’s the right decision for you and set you up with experts in your area.