If you are at the point where you can no longer keep up with your monthly bills, you really have only two ways to deal with your debt. First, you can generate more income so you can pay all you owe each month. Second, you can reduce the total you pay out each month. In tough times like these, extra income is beyond the reach of most of us and we can only go so far in cutting expenses like food and utility bills. The major source of trouble for many Canadians is their unsecured debt, and the best way to deal with that is some form of debt consolidation. Red Deer residents need to know there are several debt consolidation options Red Deer available.
Debt Consolidation Loans
The core idea behind all debt consolidation solutions is to eliminate the multiple monthly payments you are currently making to your unsecured creditors with a single, more affordable monthly payment.
The simplest way to do that is to take out a debt consolidation loan. Red Deer residents with a source of collateral – such as equity in a home – and good credit can borrow money and repay all their unsecured debt, leaving a single and lower monthly payment for the new loan.
Debt Management Plans
However, debt consolidation loans are beyond the reach of many and for them there are debt management plans offered by consumer credit counseling agencies. A professional counselor will review your financial situation and figure out a monthly payment you can afford to make towards repaying your unsecured debt. This single payment goes to the counselor, not to your creditors.
What the counselor does for you is contact your creditors and demonstrate that you are in trouble and can no longer continue making the regular payments. Instead, they propose an extension of the repayment period up to 3 years that will allow you to pay back all you owe. These solutions, however, only work if your total debt is low enough to be fully paid in 3 years or less. What then?
Debt Settlement Plans
For people with high levels of debt there are debt settlement plans. The idea is the same as the debt management plan – consolidate your multiple monthly payments into a single payment. Here the professional debt solution provider has a tougher job negotiating with the creditors. First, they typically propose a repayment period of 5 years. Second, they must get the creditors to agree to reduce the total amount you owe to match the total you will pay out with 5 years of making single payments to the provider, less their fees and commissions.
Orderly Payment of Debts (OPD)
An Orderly Payment of Debts is essentially identical to a debt management plan. Your debt total must be low enough to be repaid in 4 years. An OPD is only available through approved non-profit credit counselors in the Provinces of Alberta, Saskatchewan, PEI, and Nova Scotia. An OPD is a legal proceeding that gives you protection against creditor collection activity.
Consumer Proposals
If your debt total is too high to qualify for an OPD, a Consumer Proposal is definitely an approach to debt consolidation Red Deer residents should consider. It is similar to a debt settlement plan where you repay less than the total you owe over a 5-year period but it comes with legal protection. To see if you qualify for a Consumer Proposal you will need to contact a licensed Red Deer bankruptcy trustee.
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