Living in a metropolitan area like Markham can be expensive and can make racking up unnecessary debt all too easy. If you’re currently struggling with excessive debt and aren’t sure how to deal with it, debt settlement could be the solution you need.
Keep reading for everything you need to know about debt settlement in Markham Ontario.
What Does the Debt Settlement Procedure Involve?
While there are many different debt management strategies available in Markham, a debt settlement involves reaching out to your creditors and proposing a deal that, when approved, relinquishes you from a significant portion of your outstanding debts.
Typically, this is done by offering them a singular lump sum payment and can be completed in one of two ways:
Solo Debt Settlement
The first route you can take is to offer your creditors a debt settlement with no outside help. You would contact them in some way, negotiate a proposition, and if all goes well, any collection penalties that have been laid against you should come to an end, hopefully saving you from having to declare bankruptcy down the line.
The only problem is that, without an experienced negotiator on your side, your creditors may be less inclined to accept your offer or give you a reasonable deal, which would force you to look for other options, such as a professional debt settlement.
To learn how to negotiate a debt settlement on your own, click here.
Professional Debt Settlement
If the prospect of a solo debt settlement seems too risky and you would prefer someone with more experience to oversee your case, you can also hire a debt settlement company to take part in the negotiations with you. With the same goal in mind, this company may even be able to get you a better deal than you would earn by yourself.
Nevertheless, hiring professional aid comes with risks of its own. For example, no debt settlement company operates for free. Once the deal is done, they are likely to charge you for their services and said fee may be out of your price range.
Furthermore, there is an unfortunate amount of predatory organizations and scam artists that lurk within the business of debt settlement. These entities will use your desperation as an excuse to charge you unreasonable fees for otherwise inadequate help or, in the case of scammers, to steal your money and identity.
Needless to say, when you’re thinking of choosing debt settlement, doing prior research and asking questions is more important than ever. Make sure that the company you chose has a valid license to operate in Ontario, good customer reviews and a reputation you can follow, and that they don’t attempt to charge you anything before they actually help you.
Not sure which debt management option is right for you? This infographic can help. What Else Should I Know About Debt Settlement in Markham?
Now, before you get too invested in debt settlement as your preferred strategy, it’s important to set your expectations appropriately and understand that this solution is not for everyone, nor is it necessarily a cure-all tool for your financial issues.
Despite its helpfulness under the right circumstances, the process also involves a few caveats that may make it totally wrong for your situation, so be sure to take them into consideration before you attempt either form of debt settlement.
For instance, a debt settlement in Markham may not be appropriate for you because:
- It is not a legally binding procedure, so lenders and collection agencies are not required to accept any deal you offer them, which can further limit your options.
- If the offer is accepted, a record of the event will show up on your credit report and remain in your credit history for several years, even after your final payment has been made.
- In addition, any credit accounts that are linked to the settlement will receive the third-worst credit rating of R7 until the process ends.
- If you apply for new credit during and in the months that follow the settlement, this damage can deter potential lenders from approving you, at least for favorable, reasonably priced credit products.
- The settlement itself may end up being beyond your budget and failure to pay your lump sum as agreed would simply result in worse financial problems.
For a more in-depth look at how debt settlement affects your credit, check out this article.
Can a Debt Settlement Cover All My Debts?
Another huge caveat that you must be aware of when it comes to debt settlement is that only certain kinds of debts will be eligible for such a procedure. In this case, only unsecured debts, as well as some debts related to non-credit entities will be accepted.
On the other hand, debts that involve collateral (secured debts) must be excluded because they imply that a lender or other outside party holds temporary ownership over one of your assets, such as your vehicle or house. The same can be said about debts that come from various legal and government-related entities. So, take a look at the examples below before you attempt a debt settlement in Markham.
Acceptable Debts
- Credit cards
- Personal lines of credit
- Unsecured loans
- Payday loans
- Traditional student loans
- Non-credit bills (utilities, internet, etc.)
Unacceptable Debts
- Mortgages
- Home equity loans and lines of credit
- Secured loans
- Vehicle loans
- Federal student loans
- Legal fines (lawsuits, tickets, etc.)
Everything you need to know about qualifying for debt settlement, click here.
Is Debt Settlement Right For Me?
Remember, a debt settlement, while helpful in more ways than one, may not be the best choice for your particular financial situation.
Before you apply yourself to this solution, you must be able to afford the potential lump sum payment and debt settlement company service fees that follow (if any). Additionally, you must be willing to accept some significant damage to your credit report and be able to get by without credit products until your finances have recovered.
If you are willing to deal with those possible consequences, then a debt settlement may be right for you after all. Nonetheless, we’ve included a basic list of the advantages and disadvantages of choosing a debt settlement in Markham, to help solidify your decision.
Advantages
- With some good solo or professional negotiation, your final outstanding debt balance can be drastically reduced, saving you a solid amount of money.
- This would effectively lower your debt-to-income ratio, which will gradually improve your credit score.
- Defaulted payments will stop showing up on your credit report (also good for your credit score).
- If you successfully complete your final payment, no more late penalties or interest will pile up against you and most debt collection procedures will cease.
- Unlike other debt management procedures, which can take months or even years to complete, a debt settlement is a lump sum that can be paid off in one go, allowing you to quickly get back on track toward repairing your finances.
Disadvantages
- This is not a legally binding procedure, so lenders/collection agencies may not accept your settlement offer.
- The resulting damage to your credit can make future lenders skeptical of your ability to make payments on time, leading to less favorable credit products or total rejection of your applications.
- Failure to make your lump sum payment as agreed can simply lead to worse debt and financial problems.
- Even though you’re paying for their services, a debt settlement company may still be ineffective at striking a deal with your creditors.
- Being too hasty and not doing proper research into a supposed debt settlement company’s background can lead to scams, fraud, and identity theft.
Do you know what the true cost of borrowing is? Find out here. Are There Any Alternatives to Debt Settlement?
If you’ve decided against a debt settlement in Markham or if you would simply like to weigh your options properly, don’t worry, because there are a few other alternatives that may be better for your financial situation. That said, these alternatives also come with various advantages and disadvantages, so be sure to speak with a financial advisor or credit counsellor before you attempt any of them.
Alternatives to Debt Settlement Include (but aren’t limited to):
- Borrowing from family or friends
- Withdrawing from your home equity
- Applying for a debt consolidation loan or program
- Going to credit counselling
- Filing a consumer proposal
- Declaring personal bankruptcy
Looking Into Debt Settlement?
If you’re interested in how the debt settlement process works, there’s no better network to visit than Loans Canada. Contact us today or check out our website for more information about how debt settlement in Markham could be the solution you’ve been looking for.
