Get familiar with the basics of debt management.
The ABCs of credit will give you a brief overview of some basic ways to better manage your debt, plus the options available should you become burdened with debt you are unable to repay.
If you have any questions about your credit challenges, please call us. Prudent has experienced loan officers who can assist you.
First, take the time to learn the following:
Understanding your credit report is critical to staying out of trouble. Click below to learn more.
Credit cards can come in handy, but the card companies don’t always tell you what you need to know. Click below to find out how to calculate the real interest on your minimum payments.
Payday loans can be dangerous. Click below to learn how your fees will skyrocket if you take a payday loan and can’t pay back on time.
Second, if you have overwhelming debt beyond your ability to repay your creditors, here are four options to consider:
Debt consolidation using the equity in your home
- Never pay any counselling agency up front until verifying that the company is legitimate.
- Counselling agencies usually propose a freeze of interest and a repayment plan which will fit your budget and will also be acceptable to creditors.
- Usually, you repay the total principal owed. You send a single monthly payment to the agency which disburses this to the creditors.
- Agencies will take a small percentage of the payments to cover their costs. Most are non-profit.
Credit Counselling – used primarily for smaller debt $5000 and under
- Never pay any counselling agency up front until verifying that the company is legitimate.
- Counselling agencies usually propose a freeze of interest and a repayment plan which will fit your budget and will also be acceptable to creditors.
- Usually, you repay the total principal owed. You send a single monthly payment to the agency which disburses this to the creditors.
- Agencies will take a small percentage of the payments to cover their costs. Most are non-profit.
Consumer Proposal
- Interest is frozen and principal is paid back at a rate which is usually less than 100 cents on the dollar. The rate will be determined by your trustee in accordance with what you can afford to pay for up to five years as well as what creditors will accept.
- Your monthly repayment will be disbursed by your trustee to the creditors.
- The proposal does not come off your credit report until three years after the debt is paid in full. So, if your proposal takes 5 years to pay back, it will be 8 years until it comes off your credit report.
- Note: Prudent will pay off the trustee when the proposal is about 3/4 completed, so you can be discharged earlier and start to rehabilitate your credit.
Bankruptcy
Bankruptcy is an avenue the law allows to consumers who have debt significantly beyond their ability to repay their creditors.
- Most first time bankrupts make a monthly payment based on income to the trustee for a period of nine months.
- After nine months of payments, after all obligations to the trustee are fulfilled, you will be discharged from bankruptcy, and will be free of all or most of your debt.
- The bankruptcy will remain on your credit report up till 7 years after the date of discharge.
- Note that Prudent does make loans to undischarged as well as discharged bankrupts so that people can start to rehabilitate their credit sooner rather than later.
Disclaimer
Prudent reports all your Prudent loan payments to credit bureaus. But Prudent cannot “fix” or “repair” your credit. The credit bureau reports on the totality of your credit activities. The bureau updates regularly on your payments on credit cards, utilities, taxes as well as to banks, finance companies, credit unions etc. Prudent does try to educate its credit-challenged customers on wiser management of their financial affairs using information from responsible financial sources such as Bankruptcy Canada, Industry Canada, Credit Canada Debt Solutions, and BDO.