The Canadian Loan Landscape Part 3: Debt, Collections and BankruptcyBy Caitlin in Loan landscape
The first part of our Canadian Loan Landscape series tackled unsecured loans, the second part covered secured loans, and today’s final part in the series will analyze debt management options, how to deal with collection agencies and bankruptcy as an option of last resort.
If debt has become so strong an issue for you that you can no longer keep up with your debt payments you might be interested in considering the various debt management and/or consolidation programs that exist. These institutions can help you organize your debts, negotiate with your debtors, and create payment programs that can help you work your way out of debt.
If you are overwhelmed with payday loans or stuck in the payday loan cycle, then some financial institutions, such as Loans Canada, can help you bounce out of the payday loan trap. This is a great debt reduction strategy as well.
The key to staying out of debt is to avoid over-extending yourself financially. It might not always be possible: emergencies do happen, jobs may be lost etc., however prevention is always better than letting yourself drown in debt. We have created various resources to help our clients in this very situation, so visit our learning center and start reading up not only on loans, but credit score information and debt management as well.
Now, if ever you do find yourself in a bad situation with your debtors then it may be possible that they send their collection agencies after you. This usually occurs after you have missed payments and show no sign of paying. It is crucial that you find a solution to this problem as quickly as possible because an account in collections will be listed in your credit report and it will have a strong negative effect on your credit rating. Collection agencies are pushy and they are aggressive, and with the negative effect on your credit score they can single-handedly keep you from obtaining future financing which may damage your position even further. If ever you find yourself in this situation it is best that you quickly find a solution to this problem. You can read more about that here.
There may come a time when you may have to consider a consumer proposal or even bankruptcy. This occurs when you have too much debt and all other options are exhausted. Both are very detrimental to your credit score and that is why they are always left as methods of last resort, but thousands of Canadians use either strategy every year and successfully bounce back to good financial health, even if it does take some time. If you are looking into a consumer proposal or bankruptcy we actually created a previous blog post that compares the two, check it out: Consumer Proposal vs Bankruptcy.
Whether you’ve had to go through credit counselling, a debt consolidation program, a consumer proposal or bankruptcy chances are your credit score has taken a hit. If that’s the case then the natural course of action that follows these events is attempting to once again grow your credit rating and improve your financial profile. To accomplish this it is best that you first understand how your credit score is calculated. Next, a common way to work on improving your credit score is to obtain some new form of financing. This of course might prove difficult given your financial history. However, options do exist: for example, you can always go for a secured credit card or some other kind of secured loan option; just ensure that your lender reports back to one of Canada’s credit bureaus. If you have been discharged from bankruptcy then your debt burden has probably been cleared, making you a great candidate even to unsecured loan providers.
What should you do next?
Loans Canada is unique in that we can connect you to specialists of all sorts. Whether you are looking to re-establish your credit score, reduce your debt burden or obtain financing for your first home, we can help. Contact us today!