A free grant from the Canadian government might sound very attractive, especially when you have debt up to your neck. Being in debt can be a frustrating and demoralizing situation. Some people can offset their debt themselves, while others whose debt is either too high or lack financial knowledge need some assistance.
You might be familiar with some companies that advertise Canadian government loans and grants that get you out of debt; sadly, these grants do not come directly from the government. These companies operate under government-approved standards and regulations to facilitate loans and grants for their consumers.
Canadian Debt Relief Programs
Currently, no level of the Canadian government offers any debt relief programs; only private corporations are in charge. However, these private corporations must first obtain a license to begin these programs subject to the government’s rules and regulations.
The government controls their functions, charges, and monitors these services to ensure they are licensed, legal, and not scamming the people.
The Canadian government has only one debt reduction program designed for its citizens. It is known as the consumer proposal; it is a formal, safe, reliable, and legal debt settling program that helps people in debt avoid bankruptcy.
However, there are several private programs designed according to each person’s financial situation.
Programs to Offset Debt
Below are some programs Canadians can leverage to start offsetting their debts and attain financial freedom:
1. Debt Consolidation
Debt consolidation is one of the main ways to pay off credit card debts or student loans in Canada. It works by combining all your debts into one monthly payment and helps lower the amount you pay over time. Combining small loans and bills into one convenient payment will make debt repayment more convenient and affordable.
When you consolidate your loan, you’ll be open to getting a new interest rate, which can impact your overall ability to pay your debt sooner. Debt consolidation loans are accessible in banks, credit unions, online lenders, peer-to-peer lenders, and short-term lenders.
Pros of Debt Consolidation
- Low interest
- Payments may be deferred for a more extended period.
- Excellent credit card debt solution.
- It makes debt repayment manageable.
Cons of Debt Consolidation
- Rigorous qualification process
- It does not erase debt totally
2. Credit Counselling
This program gives you access to loan counsellors. A non-profit credit counsellor reviews your loans, and a multi-year repayment plan is created. This counsellor will provide some tips and strategies to ease debt payments. Your credit score and finances will be examined to help you strategize on how to offset your debt.
Pros of Credit Counselling
- It is an excellent debt management program
- Counsellor are professionals
- Provide valuable insights and experience to maintain good financial health.
- Different alternatives are provided to offset your debts
- Interest deduction
Cons of Credit Counselling
- It has a lengthy procedure.
- You still have to repay your loan
- Counsellor fee might be pricey
3. Debt Settlement
A debt settlement agreement is a non-binding arrangement between you and your creditors to repay a part of your debt. If you have a large debt and cannot repay it entirely, this method may be preferable. By settling, you agree to pay them a lesser sum than what you owe.
You can approach this in multiple ways: first, you can try to contact each account on your own and discuss a settlement. Secondly, you could team up with a credit counsellor and have them deal with your creditors on your behalf.
Pros of Debt Settlement
- Increases your credit score once the debt is closed
Cons of Debt Settlement
- It is not guaranteed
- High charges
- Scams may be concealed in plain sight.
4. Consumer Proposal
A consumer proposal is a formal agreement for debt settlement. You and your creditors reach a legally binding contract to repay a percentage of your debts over an agreed term and often at a fraction of the cost. This debt repayment method can be used for almost all kinds of debts aside from mortgage or car loans.
Pros of Consumer Proposal
- Debts are technically discharged by the end of the proposal period.
- It can be used for debts, including personal loans, tax debts, credit cards, and student loans.
- Your credit score will be rebuilt.
Cons of Consumer Proposal
- Payments on car loans and mortgages can’t be paid through this method
- Understand the laws and regulations; anything that is illegal can result in a court action.
Bankruptcy is a civil procedure that is used as a last resort when dealing with debt. It is the most extreme option to offset your debt and should only be used as a last resort. When you file for bankruptcy, you request a judge to evaluate all your assets against all the debts you owe.
To successfully file for bankruptcy, you must meet with a bankruptcy trustee and consolidate all your finances. The judge will evaluate your finances and decide whether you have enough assets to apply to your debts. Once it is ascertained that your debt is more than your assets, your debt could be cancelled.
Note that you may need to apply some of your assets to your debts before they can be cleared. This is dependent on your financial situation as the bankruptcy process varies per person. You can contact a bankruptcy trustee if you have any concerns or questions.
Pros of Bankruptcy
- It prevents lenders from aggressive collection action.
- It helps people who are at a crossroad with their debt clear them.
Cons of Bankruptcy
- It will remain on your credit card for a minimum of 6 years, which will impact your ability to borrow or open a new account.
- Your credit card will be frozen during the process and won’t be unfrozen until completing the entire process.
Ensure you look for the following before considering a debt settlement company:
- Don’t feel pressured.
Some debt settlement firms use offensive phone calls to promote their services. High-pressure sales tactics make it impossible to make informed decisions. Don’t feel obligated to commit to anything straight away when you get a call.
- Carry out due diligence
Be aware that certain debt settlement firms may guarantee what they can offer but might be impractical. They could deceptively advertise their services.
Some debt settlement companies can charge exorbitant fees. You do not want to add more debt to what you already owe, so it is advisable to seek affordable companies.
It is aggravating and challenging to be in debt. There are tons of companies that ease the burden of debt for you. However, before contacting any company, ensure you are aware of their terms and conditions. Some of these companies get you into an even deeper financial mess! You can seek advice from a financial professional if you have any questions.