Your financial situation can change at any moment. Perhaps you’re recently unemployed or have an unexpected financial setback. Now, you’re falling behind on your monthly payments, and your debt is racking up. According to a TransUnion report, consumer debt rose to $2.6 trillion amid higher mortgage balances, even as interest rates fell. Oftentimes, this can cause financial stress on your budget. So, you’re wondering how to get rid of your debt before it gets worse. Whatever the reason, there are telltale signs that you may need help by way of a debt relief program.
Here, we’ll review the 8 significant signs that you need professional help settling your debt.
1. You keep reaching your credit card limit
Maxing out your credit limit could show that you’re relying heavily on credit. The more you add to your credit card balance, the more you have to pay back to your lender. Also, your debt-to-income ratio will be higher and may lead to a lower credit score.
2. You’re struggling to make monthly payments on time
Instead of paying off your balance in full every month for your loans, perhaps you’re choosing to make the minimum payments. Although this may be convenient, the debt can grow quickly. For instance, credit cards charge a high interest rate, usually around 20%. Thus, it’s easy for the debt load to grow fast.
3. You’re struggling to balance different loans
It can be tricky to balance many debts, even unsecured debts. For example, you may be juggling student loans, a mortgage, car payments, credit card debt, and payday loans. If you miss a payment, you’ll likely pay more interest on the money you’ve borrowed. So, it’s important to understand how to prioritize your debt payments.
4. You regret your purchases
We all make impulse purchases sometimes. Whether it’s from getting a good deal or buying something that lifts our mood. However, if it becomes a repeat pattern, you want to curb your spending. Otherwise, it could affect how you save for your financial goals, such as retirement. If you find yourself feeling guilty about your spending habits, it’s a good time to reflect on your money values.
5. You haven’t saved up enough in your emergency savings fund
When you’re living paycheque to paycheque, it can be challenging to set aside money for unexpected expenses. Nearly 1 in 3 Canadians say they’re short on money at the end of the month, according to the Financial Consumer Agency of Canada. When you don’t have savings set aside for emergencies, you may be prone to borrowing money and relying more on lenders.
6. Your debt keeps growing
No matter how hard you try, you keep seeing your unpaid bills grow. Perhaps it feels like you’re pushing a snowball up a big hill. It can be frustrating and embarrassing. This could mean that it’s time to get professional help to start tackling your debt.
7. Your credit score is dropping
Your credit score is a way for lenders to assess how financially reliable you are at repaying the money you borrow. When you see your credit score declining, it’s an opportunity to get into better financial shape. Reducing the amount you charge on your credit card and paying your full balance on time every month are ways to help boost your credit score.
8. When you get calls from creditors
You have overdue bills, and you start getting collection calls. This situation can go down a slippery slope. At this point, it’s critical to recognize what’s happening and make a decision to turn your financial situation around. Plus, you want to avoid filing for personal bankruptcy, which could be a longer road to recovery.
What is a debt relief program?
A debt relief program helps consumers repay their debts. There are different options available. It could be through a debt management plan, debt settlement, or debt consolidation. These debt relief programs typically consolidate various debts into a single payment at a lower interest rate. Or the company will negotiate with creditors on your behalf to help settle the debt.
Ways to get your debt back under control
There are other debt management solutions you should consider before making a decision.
Consumer proposal
A Licensed Insolvency Trustee (LIT) can help with the legal process for filing a consumer proposal or bankruptcy. However, there are key differences between filing for bankruptcy and a consumer proposal.
Simply put, a consumer proposal is a legal agreement between a consumer and creditors to pay off debt without filing for bankruptcy. The insolvency trustee will help you determine a repayment plan, and you can keep your assets.
Bankruptcy
In contrast, bankruptcy involves selling or seizing assets to repay creditors. The process may be faster than a consumer proposal, but it will hurt your credit score and should be considered as a last resort. You can find more information on the Canadian government’s website about the Bankruptcy and Insolvency Act.
Debt consolidation loan
A debt consolidation loan helps pay off numerous debts by combining them into a single monthly payment. Usually, it comes with a lower interest rate. It helps to streamline your debt payments, shorten your debt payment schedule, and save you on interest charges.
Non-profit credit counselling
Another method is to seek debt help from a non-profit credit counselling service. They can help you assess your financial situation and create a tailored debt consolidation plan. Here at Consolidated Credit Canada, we have a team of trained credit counsellors who can provide a free evaluation.
Your journey to improving your financial well-being
Being in debt can evoke a range of emotions, like loneliness and shame. Know that you are not alone, and that there is a way through. There are solutions to help you become debt-free. Organizations like Consolidated Credit Canada are here to help you come up with a debt management plan that suits your needs. All it takes is reaching out to a professional Credit Counsellor who can help guide you through your debt relief journey.
