In Canada, the average cost of living can be pretty high. Most People have more than one or two bills to worry about. With rent and mortgage payments skyrocketing, it can be hard to keep up with utility bills and other daily expenses. If that’s the case for you, don’t panic, because you may be able to qualify for a payment deferral. If you don’t know what that is, here’s everything on what is a payment deferral.
What Is A Payment Deferral?
No matter which utility services you sign up with, letting your bills pile up and become overdue is never a good idea. It’s important to figure out a solution before it gets to that point. In this case, we’re talking about a payment deferral. It is an agreement that you may be able to negotiate with your provider. When applicable, this deal would allow you to suspend your payments temporarily and restart them at a later date.
How Does A Payment Deferral Work?
If you think you’re going to miss a payment, it’s extremely important to contact your service provider. They can help you determine if deferrals are an option.
Installment Plans
While the terms of every bill deferral agreement will vary from provider to provider, programs usually allow you to suspend your payments for several months, provided you pay whatever you owe once they resume. Typically, any principal and fees you’ve accumulated will be divided into installments and spread across a new payment plan.
Watch out, as this could make your bills more expensive for quite some time. However, if you can save up the appropriate funds, it may be a better idea to pay what you owe as quickly as you can to save on any extra fees or interest.
Some Conditions May Apply
When it comes to deferring your bill payments, having a good relationship with your service provider is key. For example, if you already have a history of missing payments, you may not even qualify for any of their programs, at least not for more than one or two months’ worth of deferred payments.
This is why it’s essential to contact your provider before you start missing payments and discuss the situation properly. If you have a good reason for deferring your bills and can show them that your finances will eventually recover, then you might be eligible for the best programs available.
When you contact your service provider, be sure to ask them about the conditions and fees that apply to their bill deferral programs. That way, you can better determine if one of them is the right option for you or whether you should consider an alternative.
What Qualifies As A Utility Bill?
As mentioned, the utilities you consume on a daily basis can make up a significant portion of your regular living expenses. Some of the main utility services you might have to purchase a contract for include but aren’t limited to:
- Water
- Electricity
- Internet
- Gas & Oil
- Heating, Ventilation & Air Conditioning
- Television (satellite, cable, etc.)
- Phone (landline & cell phone)
What bills should you focus on when you can‘t afford to pay them all?
Alternatives To A Payment Deferral
If your service provider’s bill deferral program ends up being too expensive or their repayment plans aren’t appealing, perhaps one of the following alternatives will better suit your financial needs. Once again, don’t forget to check the terms and conditions prior to signing up with any lender:
Apply For A Personal Loan
This is a lump sum of money that you borrow from almost any bank, credit union, or private lender. Similar to a bill payment deferral, you would repay what you owe through installments. However, this might be a faster solution because you could simply finance all your bills at once and be left with a single, more affordable repayment plan.
That said, a personal loan might end up being more expensive, especially if you have prior debt problems, unhealthy finances, or bad credit. Unfortunately, these issues can make it harder to qualify for a large personal loan with a reasonable interest rate.
Seek Financial Counselling
If you’re having trouble finding affordable options, you may want to make an appointment with a credit counsellor. They can help assess your situation and provide you with a solution. Be careful, as the solution they refer you to might impact on your finances and credit differently than a bill payment deferral. Additionally, no financial counselling service can magically fix your finances, pay off your bills, or improve credit score. If they claim to do any of these things for a price or their services look too good to be true, walk away.
Prioritize Your Bills
If all other alternatives are too expensive or unappealing, you may need to cut down expenses heavily for a while. Maybe you can find a prepaid cell phone plan or cancel your subscriptions. In the summer months, open your windows instead of constantly running your air conditioning.
Learn to save money with a budget.
Hopefully, by reducing your less necessary utilities, you can free up more money for those you should prioritize. This may include heating in the winter, electricity to cook with, and good internet so you can work from home during any more periods of quarantine.
What Happens When You Miss A Utility Bill?
That brings us to our next subject, the possible consequences of paying your bills late, making too many minimum payments or, even worse, avoiding them altogether. These consequences can include but aren’t limited to:
Penalty Fees
When you don’t pay a bill on time, one of the first things your provider will do is charge a late penalty to your account. Although it may not seem like much, multiple penalties can increase your debts rapidly. Don’t purchase a contract with any utility provider until you find out how much you would pay for a defaulted bill.
Credit Damage
Like a bank, many utility companies will report your payment activity to at least one of Canada’s credit bureaus (Equifax or TransUnion). Every late, short, or missing payment will show up on your credit report for several years and gradually decrease your credit score. In the long run, having bad credit can also be very problematic, making it hard for you to get approved for new credit (loans, credit cards, etc.) and affordable interest rates.
Services Suspended
Luckily, many utility services can offer you a grace period in the event of financial hardship, during which you may be able to pay your bills late for minimal fees or negotiate a new contract altogether. However, if you keep missing payments, the company might think you’re avoiding them and cut your service off completely. Not only could this result in a lack of electricity, hot water, or other necessity, they may even refuse to take you on again as a client in the future unless you resolve the situation properly.
Small Claims Court
If you avoid your bills for long enough and end up owing a sizeable debt, some utility providers may even bring you to court, resulting in wage garnishment, lawsuits, and other costs that would be hard to recover from. In fact, some court cases can be dragged out for months (even years), during which you may also have to pay for legal counselling, court fees, and other costs that far outweigh a bill deferral plan or a few late penalties.
Seek The Professional Help You Need
Remember, your bills can pile up quicker than you realize. If you think you’re going to have trouble covering your bills, it’s best to contact your service provider immediately to get the situation resolved before any debt or credit damage occurs. If you’re looking for alternative options to help conquer your debt load, talk to Loans Canada today.
