Debt payments can eat up a large part of your income, leaving you with less money for your needs. Your payments may have increased with recent hikes in interest rates, making them harder to manage. However, the right financial advice can be a game-changer. It will provide stress relief and peace of mind. Many people listen to online ‘Debt Experts’ like Dave Ramsay and turn to Reddit Forums for advice. Here’s what you should look for and the questions you must ask before trusting someone with your finances.
How to Fix Your Debt Problems
Understanding the different debt solutions lets you take control of your financial situation. The right financial advice for you will depend on how severe your debt problems are. Five common ways to get your debt under control are:
- Budgeting advice- A personal finance expert, such as a money coach, can help you learn to budget, manage your monthly expenses and save.
- Consolidation loans: If your budget shows you have too many payments or the interest rates on your debts are high, you can consider a consolidation loan from a financial institution. A consolidation loan will pay off your debts. You repay the loan with one monthly payment.
- Credit counselling- Credit counselling agencies aim to help people in debt by helping them budget. They can set up a debt management plan for you as well. Before dealing with a credit counsellor, you must check their qualifications to ensure they have the necessary credentials to help you. Their debt relief options aren’t legally binding. Creditors can still contact you even if you have a debt management plan.
- Consumer Proposal- A Consumer Proposal can reduce your debt by up to 80%. You’ll have a monthly payment plan and up to 60 months to pay it off. Only a Licensed Insolvency Trustee can put a Consumer Proposal in place. If you have too much debt, this is an effective debt relief strategy, however, it will negatively impact your credit rating.
- Bankruptcy- Filing for Bankruptcy will eliminate your debt but severely impact your credit score. It is often a last resort, but one that many people will agree has helped them regain their finances. A Licensed Insolvency Trustee must file a bankruptcy on your behalf. Your province or territory determines what assets you can keep if you file for Bankruptcy.
Who can help me with my debt?
You can find financial advice everywhere, but is it right for you? Many people look for advice online from debt experts like Dave Ramsay. They may join forums like Reddit/PersoanlfinanceCanada. Other sources of guidance include debt consultants, financial advisors, credit counsellors and Licensed Insolvency Trustees.
Online advice
Online advice can be helpful if you’re just starting out. You can find general advice about basic topics like budgeting. The advice is free, and some online contributors like Dave Ramsay are very knowledgeable. However, online advisors and forums may not be as helpful because:
- They don’t take your specific situation into account.
- They may only address one issue, like credit card debt.
- Their advice may not work for you.
- Getting results from their advice can take a long time.
- Their solutions put the burden on you to fix the problem
- If the advice is inappropriate, you can waste time and possibly make things worse.
Debt consultants
Almost anyone can call themselves a debt consultant. There are no regulations governing what a debt consultant is. Debt consultants don’t need to have any specific education or licensing.
Debt consultants may offer to arrange a debt settlement with your creditors. They may also refer you to a Licensed Insolvency Trustee. Any solutions they offer are not legally binding. Your creditors do not have to accept the terms they offer. They charge significant fees for their work and often refer you to a Licensed Insolvency Trustee for a fee. You can book a free consultation with an LIT yourself and save some cash.
Financial advisors
Financial advisors and financial planners typically deal with investments rather than debt. Some provinces require them to have completed specific courses or certifications, while others don’t.
They’re often paid a commission on the investment products they sell. Others charge a fee for their services. They may provide advice about your debt as part of a financial plan. However, their expertise may not be as focused on how to manage debt as other professionals.
Credit counsellors
Credit counsellors can help with budgeting and give debt advice. They can offer a debt management plan as a solution. It’s important to remember that a debt management plan is not legally binding. If your debt problems are more than they can help you with, they’ll refer you to a LIT.
Some credit counsellors and credit counselling agencies belong to credit counselling associations. Before working with a credit counsellor, check their credentials. Be sure to confirm they’re in good standing with their association.
Licensed Insolvency Trustees
Licensed Insolvency Trustees offer legally binding, permanent debt solutions. The federal government licenses LITs in Canada. The Office of the Superintendent of Bankruptcy oversees their work. They offer credit counselling, Consumer Proposals, and Bankruptcy.
Your first consultation is free. The meeting allows your LIT to assess your needs and recommend the best solution. Licensed Insolvency Trustees are debt (insolvency) professionals, so you can be confident you’ll get the right advice.
Filing a Consumer Proposal or filing for Bankruptcy stops all collection activity and legal action from your creditors. The interest and fees on your accounts will stop as well.
People are sometimes afraid to contact a Licensed Insolvency Trustee. They fear they’ll be told to file for bankruptcy. However, your LIT will only recommend Bankruptcy if it’s in your best interest and the right solution for you.
Where to get debt help
Online advice from people like Dave Ramsey is free, but getting the right financial advice when struggling with debt is crucial. It will save you time and money and reduce stress because you know you’ll take the best strategy for your situation. Contacting a LIT will give you a free consultation with a debt expert who offers legally binding permanent solutions to your debt. Once you have the information, you can decide which program you’d like to start and begin your debt free journey right away.
Allan Marshall and Associates have been helping people solve their debt problems for over 30 years. We welcome the opportunity to help you get back on track financially. Book an appointment online or call us at 1888-371-900 for a free consultation. We’ll help you put your debt behind you so you can move forward.
