When you don’t have great debt management skills, it can lead to financial hardship, especially when you consider how expensive it can be to live in the city of Winnipeg. As such, a significant amount of consumer and household debt can end up on your plate. If that’s the case for you, a debt settlement might be just what you need.
When is the Right Time For a Debt Settlement?
Essentially, a debt settlement is when you strike up a deal with your creditors, the terms of which will allow you to pay off a significant portion of your outstanding debt in a lump sum. If the deal goes through, you should be able to “settle” your bill for less than you actually owe.
While not all debt settlements in Winnipeg will be considered acceptable, some creditors will take the deal because they would rather get some of their money back than lose it all, which might happen if you declared personal bankruptcy. One of the only problems with a debt settlement is knowing when the right time to apply is.
Only consider a debt settlement when you are:
- Having serious trouble keeping up with your payments
- Defaulting frequently, leading to penalty fees and interest piling up
- Being constantly pestered by creditors and debt collectors
- Facing legal consequences if you don’t pay soon
- Unable to qualify for a debt consolidation loan or program
- Willing to let your credit be damaged to avoid further harm to your finances
- Able to get by without credit for several months, maybe years following completion of the settlement
Can you get a debt collector to settle for less than you owe? Find out here.
How Can a Debt Settlement Be Approved in Winnipeg?
As we said, not all Winnipeg creditors or debt collectors will accept your debt settlement. If they think the deal is unfair then you might be out of luck. Nonetheless, if you’re sure that a debt settlement is the way to go, there are ways that you can get them to accept, as long as you’re willing to put in the effort and present a good deal. This can be done in two ways:
DIY Negotiation
If you happen to be a good negotiator, you can always reach out to your creditors by yourself and try to work out a debt settlement. This can be tricky, especially if you’re not prepared to make your case. However, it can be done as long as you take some precautionary measures, such as:
- Do not ignore the creditors’ attempts to contact you
- Bring bank and income statements to prove that you can’t pay the full amount
- Save up as much money as possible to afford a reasonable lump sum
- Think about selling any assets that you don’t use (secondary vehicle, etc.)
Want to know more about DIY debt settlement? Be sure to read this.
Professional Negotiation
If you don’t consider yourself a good negotiator or you’d prefer to have a professional guide you through the process, you can also hire a debt settlement company in Winnipeg to administer the deal for you. They may even be able to get a more reasonable amount knocked off your outstanding balance. Just the same, you must only choose this route if you’re willing to take precautions, such as:
- Ask them what they charge and when you would have to pay for their services. A professional debt settlement will not be free.
- Research every debt settlement company properly, as not all of them are legitimate or lawful. They may even be scam artists trying to take advantage of you or a predatory organization that will charge you a ridiculous rate.
- Look up their company name in the Better Business Bureau database and check all customer reviews. Stay away from them if they don’t have a reputable track record or if their reviews are obviously fake.
- Be aware that even a reputable company cannot guarantee a 100% success.
Take a look at some questions that you should ask a debt settlement company.
Are There Any Other Advantages or Disadvantages?
There are a few important things to consider when you choose a debt settlement, whether you do it on your own or with a professional company in Winnipeg. Additionally, there are a few other advantages and disadvantages to the debt settlement process that may affect your decision, so be sure to take them into account.
Advantages:
- If accepted, a debt settlement will drastically reduce your debt-to-income ratio
- The less debt you owe, the more your credit score will increase
- The amount of defaulted payments in your credit report will also be reduced
- The process may end up being cheaper and less inconvenient than other debt management products
- Once the settlement has concluded, you should have an easier time repairing your credit and finances
Disadvantages:
- No debt settlement is legally binding, even when it’s accepted
- A record of the settlement will show up on your credit report for several years following completion
- Your reduced credit health can leave you without the ability to secure credit in the near future (at least until you’ve repaired it)
- If you can’t actually afford your lump sum payment or your debt settlement company’s fee, you may end up facing even worse debt problems
Do you know the true cost of borrowing? Check out this infographic.
Which Debts Will Qualify For a Settlement in Winnipeg?
If you’re about to apply for a debt settlement in Winnipeg, it’s best to ask your creditors or debt settlement company about which debts are actually eligible for the process, as unsecured debts (no collateral involved) are generally the only type.
Debt That Qualify in Winnipeg
- Non-Federal student loans
- Personal lines of credit
- Non-collateralized loans
- Credit card bills
- Utility bills
- Internet, cell-phone, and cable bills
- Back taxes
Debts That Don’t Qualify in Winnipeg
- Vehicle loans
- Mortgage loans
- Home equity products (loan, HELOC)
- Collateralized loans
Click here to learn the differences between unsecured and secured debt.
What Alternate Debt Management Products are There in Winnipeg?
If you’ve determined that a settlement isn’t the best choice for you, there are a few other alternatives in Winnipeg you can pick from. However, know that each one is also going to have a few pros and cons that may affect your financial situation. So, make sure to talk to a financial expert before you choose any of the following:
- Credit counselling
- Debt consolidation loan
- Debt consolidation program
- Borrowing from your home equity
- Borrowing from friends or family
- Consumer proposal
- Bankruptcy
Note: While a consumer proposal or a bankruptcy can be effective at eliminating most of your unsecured debt, they can have a serious impact on your credit, finances, and assets. Only choose one of those alternatives if you have no other choice.
Getting Ready For Debt Settlement
Finally decided on a debt settlement in Winnipeg? If so, prepare yourself by talking to Loans Canada first. We can give you all the information you need about the process. Contact us today or apply below!
