Richmond, like much of British Columbia, is currently seeing a major boom in real estate demand. The problem is, the level of increased popularity in the neighbourhood has led to a significantly higher cost of living, resulting in debt issues for many of Richmond’s residents.
If you’re in a similar situation, it’s essential to put your foot on the gas and deal with your debt as quickly as possible. That’s right, rather than let things escalate toward bankruptcy, why not look into debt relief programs in Richmond like debt consolidation?
Distinguishing Good Debt From Bad Debt
Unfortunately, there are many other scenarios that could lead anyone into debt. While housing costs can be particularly troublesome in Richmond, you yourself might be experiencing a totally different situation, such as credit card debt, a car accident, job loss or even a medical issue that’s preventing you from working. Whatever the reason may be, let’s get a jump on things and talk about some ways of reversing the flow of debt.
Before we discuss debt consolidation any further, it’s a good first step to learn how to distinguish ‘good debt’ from ‘bad debt’. We know, it’s funny to think about the fact that some debt is necessary and, for that matter, beneficial for your finances, while some can totally ruin them. Let’s look at a breakdown:
Interested in consolidating your credit card debt? Check this out.
Good Debt in Richmond
Though most don’t care to admit it, taking on some debt is more or less inevitable. Unless you’re living off the grid, chances are you’ll need a credit card to avoid carrying cash around. While you might be able to grow some food in your garden, weekly groceries and household supplies are necessary. What about paying the utility bills, getting to and from work, and staying healthy?
As a more relevant example, let’s go back to the idea of living in Richmond. True, buying a home there can be awfully pricey, but it can still be worth taking out a mortgage there because of the town’s proximity to the Vancouver city centre. You’ll also be blessed with your own home, not to mention the potential of selling your property at a much greater value someday in the future.
Bad Debt in Richmond
Then again, debt is only good if you’re being responsible with it. Even though a credit card can improve your credit score and get you access to various benefits, using it to pay for every expense is not a great idea. Although groceries and supplies are essential, eating out every night certainly isn’t. Despite your car being a major asset, driving a luxury model is definitely not as cost-effective as a plain old hatchback.
Let’s once again bring up the notion of your mortgage. While your dream home might have marble staircases and a two-car garage, buying a property that’s out of your price range can have disastrous results. As a homeowner, your mortgage payments only make up a small part of your regular expenses, yet they can lead to some of the more serious debt-related consequences, such as an eventual foreclosure.
Learning About Debt Consolidation
Luckily, there are several solutions in Richmond to choose from and two of the simpler, safer choices involve debt consolidation, which is the process of paying off multiple outstanding debts using one swift action.
Applying for a Debt Consolidation Loan in Richmond
The first tactic is to apply for a debt consolidation loan in Richmond. If you have decent credit and a relatively strong income, you can do this through your bank or credit union, where lending standards tend to be more strict. If you don’t have good credit or a high income, you can still get approved with a private, alternative, and bad credit lender in Richmond.
Whichever source you go with, the process is the same. You’ll apply for one large installment loan and use it to pay off all your other debts. This would leave you with a single monthly payment to keep track of, help you save on interest and reduce the defaulted payments appearing on your credit report. Before you attempt this, however, remember that you’re still taking on debt with a debt consolidation loan. If you don’t make all your upcoming payments on time and in full, your financial situation may just degrade even further.
Entering a Debt Consolidation Program in Richmond
If you don’t qualify for or don’t want to take on a loan of this caliber, it might be a better idea to seek professional credit counselling in Richmond. There, you can get set up with a certified counsellor who will help you enter a debt consolidation program, which has the same goal but a slightly different payment system.
Like a debt consolidation loan, you would be agreeing to pay off your outstanding debts through a series of installments. However, in this case, your counsellor will reach out to your creditors on your behalf and negotiate the deal, sparing you from having to take on any more credit debt. Instead of having a loan with an interest rate, you’ll make payments to your counsellor, who will send them directly to your creditors.
One of the only potential drawbacks here is that some credit counselling agencies will charge you a flat fee once the program is complete, meaning you’ll again have two types of payments to make. Additionally, your creditors aren’t legally required to accept the deal, so you may have to search for another solution in Richmond if things don’t work out.
Want more knowledge about credit counselling? If so, click here.
Accepting Potential Credit Damage
For both types of debt consolidation, it’s imperative that you understand the potential consequences, particularly when they relate to your credit. While neither debt consolidation tactic should affect your credit score right off the bat, the way you go about handling them afterward just might.
Debt Consolidation Loan
In this case, your payments are going to cause your credit score to fluctuate, just like they would with any other credit product. If you make a payment properly, your score will rise. If not, it will fall. The loan is also going to show up on your credit report for several years, making any future lender in Richmond skeptical of your financial strength when you apply for new credit.
However, making responsible payments will effectively lower your credit utilization ratio, which should cause your score to increase gradually.
Read this to know how applying for new credit affects your credit score.
Debt Consolidation Program
Although these programs don’t qualify as traditional credit products in Richmond and Canada, in general, the effect on your credit will be somewhat similar, in that your ability to make payments on time will also impact your credit score. A debt consolidation program will also end up on your credit report for some time, making it more difficult to secure new credit.
Despite that, the overall effect will hinge on your ability to complete the program in its entirety. Every payment you make should still be getting reported to Canada’s credit bureaus. If your creditors report your debt as paid in full, your credit score will slowly increase following your last payment. If you don’t make all your payments properly, however, the creditor will be forced to report the debt as unpaid, which will lead to more negative consequences.
Debts You Can Consolidate in Richmond
Generally, only unsecured debts, where no collateral is involved, will qualify for either form of consolidation. Secured debts, on the other hand, are more complicated because an outside party (the lender) holds temporary ownership over one of your assets, such as your house or vehicle. Certain forms of government or legally assigned debt must also be excluded. We’ve listed some examples below:
Acceptable Debts in Richmond
- Credit cards
- Personal lines of credit
- Non-collateral loans
- Utility, internet, and cell phone bills
- Medical bills
- Non-federal student loans
Unacceptable Debts in Richmond
- Mortgages
- Vehicle loans
- Collateralized loans
- Home equity products (loans, HELOCs)
- Traffic tickets, alimony, lawsuits, and other legal fines
- Government-granted student loans
Ready to Start the Debt Consolidation Process?
Loans Canada can help you connect with the best sources of debt consolidation loans or find the right credit counsellor to help you enter a consolidation program. Remember, living in Richmond can be expensive, so it’s best if your debts don’t get ahead of you. Call us today!
