Consumer debt is by no means an easy thing to deal with, especially when you have an unmanageable amount of it, which is common enough when you reside in an urban area such as Lethbridge. When that kind of debt comes your way, the sooner you act, the safer it will be for the health of your finances.
Although debt management is often easier said than it is accomplished, there are many different solutions that can help you out of a serious jam. One of the less drastic alternatives is known as a debt settlement.
Questions everyone should ask a debt settlement company, check this out.
Debts That Are Eligible for a Settlement in Lethbridge
In simple terms, a debt settlement is a type of offer that you can negotiate with one or more lenders or creditors. This offer, when accepted, would hopefully allow you to pay off a significant portion of your debt through a single lump sum installment, rather than paying the full outstanding balance over several months or years.
Before you attempt this solution, however, it’s best if you understand that there are certain types of debt that can and cannot be made eligible for a debt settlement procedure. In this case, unsecured debts that do not involve any collateral, as well as many kinds of non-credit debt can qualify.
Take a look at this article for more information about secured and unsecured debt.
On the other hand, debts that are secured by collateral must be excluded because your lender in Lethbridge still has the option to seize the asset if you stop making payments. The same rule applies to many products that involve cosigners and those that are legally or governmentally assigned. Below, we’ve provided a few examples.
Eligible Debts in Lethbridge
- Unsecured loans
- Personal lines of credit
- Credit cards
- Utility, internet, and cell phone bills
- Non-government student loans
- Payday loans
Ineligible Debts in Lethbridge
- Mortgages
- Home equity loans and HELOCs
- Vehicle loans
- Alimony and child support payments
- Lawsuits, traffic tickets, and other fines
- Government student loans
Do you know what the true cost of borrowing is? Find out here.
Debt Settlement Techniques
If you’ve determined that your particular brand of debt will be eligible, there are two debt settlement techniques that you can choose from. Although both solutions involve a similar process, they can each impact your financial situation differently, so be sure to research your options carefully before you apply.
DIY Debt Settlement
If you can provide sufficient proof that you cannot pay in full and you don’t mind negotiating with your lenders, then it is often possible to perform a debt settlement with no outside help. After all, while some lenders in Lethbridge will not be open to negotiation, others may accept your proposal if it means that they’ll have a chance of recuperating some of what they lost.
However, a solo debt settlement is not the easiest thing to do. Some lenders in Lethbridge will refuse your offer if you don’t argue a good enough case or don’t have a professional with you to smooth the deal along.
For even more advice about DIY debt settlement, click here.
Debt Settlement Company in Lethbridge
Whether you don’t consider yourself a good negotiator or your settlement offer was denied when you made it unassisted, hiring a debt settlement company may be a more effective way of getting the job done. In fact, any good company will have a number of professionals that they can assign to your case, each of who are trained and willing to broker the best deal for your financial situation.
Then again, you might not want to choose this option when you learn what a debt settlement company can charge for their services. That’s right, no debt settlement is free and you must account for these kinds of costs when you hire professional aid.
In addition, there are many “debt settlement companies” in Canada that are predatory or fake and are flat out trying to scam you. These organizations will use your desperation against you, then either charge you unaffordable fees for ineffective help or simply steal your money and identity. It’s important to make sure that the debt settlement company you choose to work with is legitimate and has a good track record, research is essential.
The Potential Impact on Your Credit
Unfortunately, a debt settlement isn’t the right option for every Lethbridge borrower. While the process can be helpful in saving you money under the right circumstances, it does come with several drawbacks which may change your mind, including the potential for a significant negative impact on your credit (for an in-depth look at this, click here).
Firstly, most lenders in Lethbridge are going to inform Canada’s credit bureaus (Equifax and TransUnion) of your debt settlement. Afterward, a record of the event will show up on your credit report for several years, even after your final payment is completed. While the process is in effect, any accounts associated with the process will receive credit ratings of R7.
During and after the fact, prospective lenders in Lethbridge can examine your report when you apply for new credit. They can then see your damaged credit history, score, and ratings, then decide that you are too risky to approve, at least for favourable products.
Nonetheless, paying your settlement on time and in full will cause your credit to gradually repair itself. Once again, only attempt a debt settlement when you are fully aware of the positive and negative consequences.
Want to know more about what affects your credit score? Click here.
The Pros and Cons of Debt Settlement
To summarize the debt settlement procedure, let’s take a look at a list of the pros and cons that come with it, any of which can affect your financial well being in a different way. Be sure to read through them and discuss the issue thoroughly with your credit counsellor or financial advisor before you make your final decision.
Pros
- You may save yourself some money if your lenders accept a solo settlement for less than your full outstanding balance.
- If accepted, your debt-to-income ratio will be reduced significantly, which is better for your credit score.
- Once a settlement is reached, late penalties and interest should stop piling up against you.
- Unlike other debt management products and programs, your settlement can be paid off in one lump sum, ending your debt relatively quickly.
- The faster your debt is settled, the easier it will be to rebuild your damaged finances and credit health.
Cons
- A record of the event will appear on your credit report for several years.
- Any accounts involved with the procedure will receive an R7 rating until your final payment goes through.
- Debt settlements are not legally binding, so a lender or debt collector can still pursue you for payment during the procedure.
- Predatory rates and scamming are possible if you don’t find a reputable debt settlement company.
- Further debt related issues can occur if your settlement gets denied or is too large for you to comfortably afford (your savings may be drained for some time).
Alternatives to a Debt Settlement in Lethbridge
If you’ve weighed the various advantages and disadvantages of a debt settlement and have come to the conclusion that it’s not the best option for you, there are plenty of other options that you can choose from in Lethbridge and the rest of Alberta. However, you should once again discuss them with a qualified advisor before you make your official choice.
Less Drastic Alternatives
- Ask your friends or family for a bit of help
- Request some overtime hours or find a second source of employment
- Withdraw the funds from your home equity
- Apply for a secured credit card (this requires a security deposit)
- Apply for a guarantor loan (this requires a cosigner)
- Sign up for credit counselling
More Drastic Alternatives
- Apply for a debt consolidation loan
- Enter a debt consolidation program
- File a consumer proposal
- Declare personal bankruptcy
Looking For The Right Debt Management Solution in Lethbridge?
If you’re in need of a debt settlement or other debt relief strategy in Lethbridge, then you’ve come to the right place. Don’t forget, Loans Canada is here to help. Simply call us today for more information or apply below when you’re ready to get the ball rolling.
