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CREDIT CARDS MAXED OUT: THAT SCARY CRUSHING FEELING WHEN CANADIAN INSOLVENCY AT HIGHEST LEVEL

credit cards maxed out

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

How do credit cards maxed out affect your credit score?

Your credit score is one of the most important things you have to offer anyone who is seeking to lend you money, whether it’s from a bank, a different credit card issuer, or even a landlord. Your credit score is a sort of credit health report that measures how much you owe, how much you owe on different kinds of credit, and how likely you are to default on payments.

Credit cards can be a convenient and effective way to manage your finances. However, the best use of a credit card may not be the best use when it comes to your credit score. Lenders consider one or more credit cards maxed out as a reason for your credit score to decline.

Right now we have a very unique situation when it comes to consumer debt. The average Canadian’s monthly credit card balance is lower today than it was 2 years ago. People’s credit card balance for months has declined. So it is not the case right now that credit cards maxed out. Yet, a recent poll shows that Canadians’ stress levels about their potential insolvency are the highest ever.

In this Brandon Blog, I look at the issues and provide some tips as to what positive things you can do if you are concerned about insolvency. Let’s look at the issues.

Changing habits as pandemic adds to debt load

There has actually been a surge in total Canadian consumer debt. It came mainly from financial debt growth in home mortgage debt and also automobile loans. Home mortgage balance increases originated from both refinancings of existing home loan debt and brand-new mortgage applications.

The thinking with vehicle financings is that it arose from Canadians acquiring vehicles that they had actually intended to purchase earlier. Concerning home loans, the refinancings were to consolidate higher interest rate non-mortgage debt, for credit products such as credit cards, into a brand-new higher home mortgage amount, at greatly reduced rates of interest.

Throughout the last 18 months approximately of the COVID-19 pandemic, Canadians have actually partially paid for or totally repaid their high-interest-rate consumer debt by turning it into low-rate debt from bigger home mortgages along with residence equity credit lines. They have used their real estate to obtain a debt consolidation loan.

Now that the Canadians have in fact done that, the Ipsos survey discovered that 50% of Canadians are now more worried about not having the capability to repay their financial obligations than they used to. Yet one-third of respondents say they will spend more as the economy resumes.

As the economy slowly resumes, many Canadians are looking at a great amount of debt incurred during the pandemic and are stressed over making ends meet without taking on even more financial obligations. They have maxed out the possibility of getting even more cash from their homes.

The reasons are that either there is no more asset value to borrow from and/or their income cannot sustain any more financial obligations. So where is one of the most likely areas this brand-new financial debt is most likely to come from? Paid down credit cards are going to increase once more and many will sooner rather than later have credit cards maxed out from additional credit card debt.

credit cards maxed out
credit cards maxed out

Canada on verge of widespread insolvency and restructuring surge in COVID-19 new normal

Statistics Canada recently reported that overall household debt increased by 0.8% for the 2nd straight month to over $2.5 trillion. Mortgage debt and also home equity credit lines made up $1.98 trillion of that total amount. Over the initial 5 months of 2021, households had $57.5 billion in home mortgage financial obligations, compared to $34.3 billion over the exact same time period in 2020.

At the same time, non-mortgage debt climbed by 0.4% in May to $786.2 billion. Growth in credit card debt as well as other personal loans was the main driver. While charge card debt rose for the third month straight, it was still down by 3.3% from May 2020.

These statistics seem to bear out my thoughts that Canadian consumers now have no more room to borrow against their homes, so now, they will need to turn back to their credit cards and increase their credit card debt in order to fund their expenses. This will not turn out well in the long run. I foresee people having maxed out the amount they can borrow against their homes and then once again having their credit cards maxed out.

Lots of people do not understand how financial problems are created pushing individuals to seek out a remedy such as bankruptcy or a consumer proposal to restructure. The majority think that people get into financial trouble because they can’t properly handle their money. However, in most cases, it is because of an unforeseen trigger. Divorce, job loss, illness and the present pandemic are examples of triggers.

People in financial trouble feel shame and unfortunately, stop them from connecting with us early. Reaching out to a licensed insolvency trustee early is so important.

Credit cards maxed out Is a bad idea

By maxing out your credit cards you’re boosting your credit utilization ratio. This accounts for 30% of your credit score. As such, a maxed-out credit card can adversely impact your credit rating.

Theoretically, yes, you can pay off your credit card by just making the minimum payment. However, it can take you years to pay it off if you are only making the minimum payment. Your interest charges will be higher than your minimum monthly payments.

Your credit utilization ratio and therefore your credit score will suffer. Many people try to solve this problem by just applying to the credit card issuer for an increased credit limit. This may work once, but it does not make any sense. You cannot eliminate debt by increasing it!

Furthermore, you’ll be carrying that debt and paying for it at a very high rate of interest. On the other hand, if you make your repayment by the due date, or make big routine payments to pay it off, you will certainly pay no or extremely little in interest.

credit cards maxed out
credit cards maxed out

Are your credit cards maxed out? Here’s some personalized tips for paying off credit card debt

What can you do trying to be credit card debt-free? My 4 step strategy can help you get there.

1. Credit cards maxed out: Take control

It isn’t simple or comfortable to take a hard look at your finances, but it is essential. Analyze your household expenses, as well as the interest rates linked to every resulting financial obligation. Track your monthly expenses to really understand what your credit card purchases get you on a monthly basis.

This is the first step in understanding your expenditures and cutting down on the ones that are not needed. To recognize where you are going, you need to recognize where you have in fact been.

2. Credit cards maxed out: Minimize interest rates

The normal rate of interest on a bank card is about 19 percent. That’s rather high, so you may wish to think of doing a balance transfer by moving your credit card debt to a card with a minimized or zero-interest offer to assist in paying it off a lot faster.

A word of care: you’ll probably require to pay a transfer fee in doing so. Likewise, you will need to repay the debt in full before that promotion price finishes. Otherwise, the remaining balance on your new balance transfer card will again attract a greater rate of interest, possibly the very same or higher than the card you moved the debt from.

Although I do not hold out a lot of hope, you can ask your credit card firms if they will lower your rate of interest.

3. Credit cards maxed out: Credit counselling as well as debt paydown approaches

If you merely cannot make sufficient earnings to fund your debt repayments, consider a non-profit credit counselling service. At no charge to you, they can get you into a Debt Settlement Plan. Bear in mind that as soon as you are in such a strategy, your charge cards will certainly be cut off.

Do not go to any one of the financial debt settlement services that market often on television or social media. All they do is charge you a fee to take down basic information that a certified non-profit credit counselling agency or a licensed insolvency trustee would certainly do for no cost. After that, they run you through their “program” charging you a lot more fees until you can pay no more. After that, they send you to a qualified bankruptcy trustee.

There are 2 regular financial debt settlement strategies– avalanche method and also snowball method. The avalanche technique of getting out of the credit card financial debt is you initially put all your available cash to pay down your highest interest rate debt. As soon as that’s cleaned up, you start settling the following most costly debt. You keep repeating this up until all your consumer debts are gone.

Sometimes, the snowball technique offers a great deal of extra motivation. With this method, you settle the tiniest financial debt initially, to improve your mood. You use that power to resolve what is the next tiniest debt and so on. You are grabbing steam like a snowball rolling downhill.

It does not matter which strategy you utilize. The vital thing is that you start now and stick with it.

4. Credit cards maxed out: Adhere to it.

Remember your single focus should be reducing debt, not new non-essential spending. So do not prepare any kind of sort of travel getaways or big purchases in the meantime. You could backslide or strike some road bumps yet do not let that distract you or depress you.

Now for the challenging part. When possible, save some money to assist with unpredicted expenses that you would typically place on your credit card. This will certainly minimize the amount you would have to borrow by paying with real cash.

It’s an incredibly lengthy as well as agonizing trip to fully pay off your credit cards maxed out. It also can be an extremely lonely one. People don’t get into the bank card debt trap overnight, so you can’t leave it without some effort.

Credit cards maxed out summary

I hope that you found this credit cards maxed out Brandon Blog interesting. I wrote this now because I fear the trend I see from both the Ipsos survey and the Statscan report shows that now that Canadians have done their debt consolidation and credit card balances are low, the credit cards are now being run up again. The end result will be higher debt than the average Canadian started with.

Problems will arise when you are cash-starved and in debt, especially with a maxed-out credit card. There are several insolvency processes available to a person or company with too much debt.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as alternatives to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people with credit cards maxed out and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost bankruptcy consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

credit cards maxed out
credit cards maxed out
Categories
Brandon Blog Post

PAYING DOWN DEBT: MY 7 ESSENTIAL YET EASY HACKS TO BE DEBT FREE

The Ira Smith Trustee Team hopes that you and your family had a restful holiday season and that you are all safe, healthy and secure.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this paying down debt Brandon’s Blog, please scroll to the bottom of the page and click play on the podcast

Paying down debt No. 1 financial goal of Canadians for 2021: Poll

A new survey states paying down debt is the #1 economic objective of Canadians to focus on heading right into the brand-new year. Many claimed that they handled more financial and high-interest debt this year to cover day-to-day expenditures and also offset a loss of revenue.

The annual CIBC poll says having a debt repayment plan has actually continued to be the top financial priority for the past 11 years. Unfortunately, what this says is that even without a COVID-19 pandemic, Canadians have been largely unable to do so. Everyone can be excused for 2020. Canadians have been grappling this past year with the financial and health challenges because of the coronavirus.

The purpose of this paying down debt Brandon Blog is to discuss the survey results and provide some tips on how to tackle debt that needs to be paid down. I truly believe that it is not your fault that you have not been able to be successfully paying down debt. You have only been shown the old ways that do not work anymore. Below I describe my 7 easy hacks for paying down debt. It is a new way of getting into the habit. It is a process that you can set up, track and see how you progress.

The survey found the 2nd monetary top priority of Canadians for 2021 after paying down debt is merely keeping up with bills as well as getting by. The survey showed that on average, Canadians expect a positive economic outlook for 2021. The poll results indicate that 24% of Canadians believe their financial position will certainly get better in 2021. This is down from 32% in 2019.

The poll also found the top economic issues facing Canadians in 2021 consist of the rising cost of living, the increased prices of goods and a sluggish economy.

Carissa Lucreziano, vice-president of CIBC Financial and Investment Advice, claims it is reasonable that Canadians are worried given the economic climate of 2020. She states the best buffer is to be prepared with a plan to satisfy your financial objectives, which includes a realistic estimate for paying down debt, that can be readjusted when situations alter.

How Debt Affects Your Credit Scores

The first thing you should know is that debts have a ripple effect across your whole financial life, including your credit history.

Revolving financial obligations includes a line of credit or credit card debt where you can churn, or rotate, a balance from month to month. You can obtain as much credit as you like up to an established credit limit. Interest is charged on any outstanding balance that is not fully repaid by the due date. Your regular monthly payment can differ on revolving debt based on your outstanding fluctuating balance.

Fixed financial debt includes mortgages, auto loans, personal loans and student loans. Most of the time, the amount of money you borrow, rates of interest, the monthly due date and the size of your monthly payment are fixed and known at the start.

With both revolving and fixed financial debts, you must pay promptly. When you miss a payment, your loan provider will report it to one of the two Canadian credit bureaus: Equifax and TransUnion. The credit bureau reporting of late payments can remain on your credit records for 7 years. When you miss a scheduled payment, you not only still owe that amount, but you will also have to pay late or default fees. Now the debt costs you even more!

Besides your payment history, there are other ways each type of financial obligation influences your credit score. With fixed installment debt, having a high outstanding amount does not have a huge effect on your credit score.

Rotating debt is a different story. If you are using a high percentage of your available credit from month to month, it will likely have an adverse result on your credit report and credit score. This is particularly true if you are doing it with numerous credit cards.

Your credit score will be negatively influenced because by using a large percentage of your available revolving credit, your credit utilization score is high. Credit utilization has considerable influence in calculating your credit score. So to keep your revolving debt outstanding as low as possible compared to your authorized credit, ideally, you ought to be paying down debt fully every month.

Why Credit Card Debt Is So Dangerous: My paying down debt calculator

When it comes to financial obligations, credit card debt is usually the most wicked.

Credit card companies can tempt you in with a low initial annual percentage rate (APR) and flashy credit limit. However, that introductory APR deal will ultimately end. When it does, you can find yourself looking at a frustrating heap of financial debt if you really did not handle your new charge card account properly. The reason revolving financial debt can be so frustrating is due to the fact that credit card interest rates are usually very high.

So, if you’re just making the minimum payment each month, it will certainly take you a long time to paying down debt. It could potentially take decades due to the interest accumulation.

Let’s say you put $15,000 on a credit card with a 19.9% APR, and then cut it up. You never get a replacement card and never spend another penny on that account. It is normal for a Canadian credit card to have a minimum monthly payment of 3% of the outstanding balance.

If all you do is make the minimum monthly payment, assuming you maintain the original minimum monthly payment as your balance declines, it will take you 25 years to pay off the full amount. You will also be paying more than double the amount you charged on the card. Here is the math:

Credit card balance$15,000.00
Credit card APR19.9%
Minimum payment3%
Monthly payment$450.00
Balance payoff300 months
Total payments$33,156.26

As you can see, paying down credit card debt this way is very expensive and I have not yet met a person who is comfortable paying down debt over 25 years, other than for perhaps the mortgage on their home.

How Personal Loans Impact Credit Scores

Personal loans also influence your credit score. Whether the loan account one-day damages or improves your score depends on 2 primary aspects: (i) exactly how you take care of the account and what else your credit history shows.

Too many applications could injure your score. That is because when you make an application for credit, an inquiry is logged onto your credit report. Too many such inquiries can damage your rating. The reason is that with more than one application close together in time, the formula assumes that you need the money and at least the inquiries before the last one turned you down.

Your credit might increase as your personal loan ages and there are no negative notations about missed payments. Initially, a new account could lessen your credit score. As your personal loan gets older and remains current, it shows you are using that debt responsibly. That can help your numbers.

A fixed personal loan might reduce your credit usage. Individual loans are fixed installment financings, which do not affect your revolving application ratio in any way. You can have a high balance on a fixed personal loan. If you pay off credit cards with a fixed installment personal loan, then your revolving utilization ratio must reduce. Over time, as long as you don’t get the credit card balances back up there and have the new personal loan outstanding, this can improve your credit score.

Your credit blend could also be enhanced with a personal loan. The credit scoring formula rewards you for having a diverse combination of accounts on your credit report. If you do not have any installment borrowing on your report, getting a fixed installment personal loan may improve your credit score. You just have to make sure that you are making your monthly payments on time for paying down debt. If not, it will damage and not help your score.

paying down debt
paying down debt

7 hacks for paying down debt quickly

Hack 1 – This is my first step to ending up being totally debt-free. This is important prior to anything else. You need to get some quiet time and start to make you’re coming to be debt-free goals real. It is a process that anyone can learn. Making those goals real does not suggest merely thinking them out for 5 seconds. What will you do daily when you are debt-free? What will it feel like? How will your life be changed? How will you feel? Write out this story on a notepad or better still a vision board. After that follow the rest of the steps below to begin to focus on your paying down debt strategy.

Hack 2 – Just how much do you intend to pay off in three months? In six months? You will make use of the steps discussed below to produce these objectives. The recommendation is that you have some shorter-term goals of just how much to save and therefore just how much debt to pay back.

These shorter-term goals need to feed into your longer-term objective. They’re easier to get to than the full objective. They also will certainly inspire you to keep going when you reach them. With your short-term objectives clear, it is time to prepare your month-to-month spending plan. It is a strategy of writing down where your money comes from and where your money is going.

You need to take the time to jot down every source of revenue you have and just how much comes from each one. You likewise need to identify and also write down where the money is going – line by line. As soon as you have done that, you can figure out where you can really decide if you can do any other activities to bring in more and what spending you can cut out. This will get you onto a savings plan, which will then give you the extra money to let you begin paying down debt.

I know I may have just lost fifty percent of you. This isn’t a budgeting blog site in itself. You have to create your budget plan on your own. I have written other blogs on the subject of budgeting which you can read here.

Hack 3 – I like fast small flares for saving cash. It will also reveal a great deal concerning the way you spend money. Start cutting back on things from your budget plan you have control over. Things like clothing purchases, eating out at restaurants (pre-pandemic) and other entertainment. I would hazard a guess that since the lockdowns and self-quarantining began last March, you have spent less on these types of spending than the year before. Go track it from your credit card statements, I bet you will see that is the case.

You can test on your own how to lower that spending in half or eliminate it out completely over the next 2 months. I am not discussing going cold turkey and not spending anything. I am speaking about a short-term challenge of a couple of months and on 1 or 2 spending things at a time.

These spending challenges work on so many levels. I am sure you will love them just like me. By only taking one or two items off of your spending, you are not attempting to save every dime.

You can still spend. You are simply trying out cutting down on a couple of things each time. Besides saving a lot of cash, this is going to reveal to you what you do not really care about in the spending side of your budget. You will now easily have gotten into the habit of not spending money on those things. You will now have savings in the form of extra money that you can use for meeting your paying down debt goals.

What is also great is that 8 weeks is right around the time it takes to construct brand-new behaviour patterns and breaks old habits. Those brand-new practices are most likely to drive you and help you feel that saving is not as difficult as you originally thought it would be. Maintaining these brand-new spending and saving behaviours is just one of the tricks for paying down debt.

How to get out of debt on a low income

Hack 4 – Next is doing a complete decluttering. Don’t worry, I assure you it’s a lot easier than it seems. You just have to get started. Go room-to-room in your residence and itemize every little thing you do not need. Specifically, those things you have not used in a long time. Set a rule such as have I used this, worn it or looked at it in the last 5 years? If the answer is no, out it goes. Do not second guess yourself. Stick to the rule.

This could include the treadmill you might have used only in the first 3 months after you got it, the out-of-date clothes that you never wear or the furniture you never ever rest on. Anything that isn’t being made use of or making your life better, offer it for sale online.

Not only are you making a little cash to help with your paying down debt. You are ridding yourself of something you do not need and someone who will enjoy it as much as you used to.

You may find that with some of the items, you could have squandered your money getting some of these things. But that was in the past. We are now only looking forward. It will also be a good memory to have the next time you think you need to buy something. I am sure you will analyze all future buying decisions differently.

Hack 5 – This is going to be another hard decision. However, it is one that a lot of people just have to do if they are serious about paying down debt. That is taking a sober look at how you travel every day.

I like seeing or paying attention to people talking about how much financial debt they have. What always astonishes me is the number of people who have a reasonable brand-new vehicle with monthly payments they do not have the money or budget to support. Seriously, people simply do not seem to see exactly how a high regular monthly auto payment is trashing their spending plan!

Besides the payment itself, insurance, licensing and maintenance costs come with the vehicle. I am not saying you cannot have nice things or that you need to never ever get a brand-new car or truck. Perhaps a clean vehicle in good condition that just came off a 3-year lease would be extra affordable and save you cash.

Appreciate your money! We do not have a great deal of time on this earth and you have to enjoy it. However, you can’t appreciate life if you’re constantly stressed out from your debt. So have a close look at what is parked in the driveway and be honest with yourself. Can really afford it?

By following this logic you will have extra cash each month that you can allocate to paying down debt.

Hack 6 – This tip most likely will eliminate lifestyle creep. Lifestyle creep is how your spending appears to increase every time your revenue does. The result is you are always stuck in paycheque-to-paycheque mode and are never paying down debt.

Just how is it that we get tax refunds or a raise, we never have enough that amount saved? You work overtime but the cash just appears to vaporize into thin air. It is the problem of lifestyle creep. Our spending plan always seems to grow to eat up whatever income there is.

Fighting lifestyle creep suggests referring back and monitoring your budget on a regular basis. Plug in that refund or additional income on an after-tax basis. Remind yourself how much you are spending. This will let you take that initiative to not spend even more if you now have a little extra. The very best thing to do is to designate that additional money for paying down debt and then to do it right away.

By having a place for that money, it stops being a temptation to spend it. It may not seem like it will conserve much however you would be surprised just how quickly normal smaller amounts will build up over time.

Hack 7 – My last money-saving method is going to put a freeze on your credit cards. Make the essential payments you have budgeted for by using cash. You simply do not obtain that very same psychological and emotional sensation when you use a credit card that you obtain when you pay with cash. When you pay with cash, you feel the purchase. Not so much with a credit card.

I’m not saying to cut up your cards. I have a credit card I use for company spending purposes and another for personal use. It is also handy to have one for emergencies if you do not have an extra money reserve yet from your savings. Stopping the use of your bank card will still keep that alternative open yet it makes you reassess your spending on practically every product.

Simply put, these 7 money-saving hacks will give you thousands of dollars over time. You can use that money first for paying down debt. Once your debts are paid off, keep up those same habits to build up savings for investment and ultimately your retirement. Each hack is simple yet effective. You will love to see how quickly you can make progress in paying down debt. Each one is not a major step, but combined together, they will have a profound effect on your debt payment plan.

Paying down debt: Do you want an avalanche of snowballs?

The 7 simple hacks I describe above gets you the cash to use to pay down your debt. Now you actually have to do it. I am sure that you have heard of the two highly touted methods of actually paying down debt being the: (i) debt avalanche method; and (ii) debt snowball method. Dave Ramsey, a US financial commentator, is a strong proponent of these methods.

Here is a summary of the two methods for paying down debt. In the debt avalanche method, you pay off your debt with the greatest rate of interest initially, 2nd greatest next and so forth. In the debt snowball method, you pay off the single debt in total with the smallest outstanding balance first, second smallest 2nd and so forth.

The debt avalanche approach of paying down debt approaches the matter from a financial perspective. The snowball method is more psychological. Both get you to reduce your debt. Both help you reach your financial goal.

If you would like more details on both the debt avalanche and snowball payment plan methods of paying down debt, read my March 2019 blog – Debt Help Near Me: Our Toronto Debt Repayment Calculator Strategy.

Can I book a meeting with someone who can help?

Of course, you can. Contact the Ira Smith Team for your no-cost consultation. We can start helping you immediately getting into a pattern of paying down debt.

I hope you enjoyed this paying down debt Brandon Blog post. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore. The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of this seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

The Ira Smith Trustee Team hopes that you and your family had a restful holiday season and that you are all safe, healthy and secure.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

paying down debt
paying down debt
Categories
Brandon Blog Post

DEBT HELP NEAR ME: OUR TORONTO DEBT REPAYMENT CALCULATOR STRATEGY

Debt help: Introduction

Canadian household debt is a problem for many Canadian families. So in this Brandon’s Blog, let’s chat about it.

There are two primary techniques for debt settlement: (1) debt stacking technique (also called the debt avalanche approach) and; (2) the debt snowball technique.

Debt help: Are you an avalanche or a snowball?

In the avalanche method, you pay off your liability with the highest rate of interest first, second highest next and so on. In the snowball technique, you pay off the single amount with the smallest outstanding balance first, second smallest second and so on.

Both techniques use, as soon as you’ve settled one, what you were paying goes to your next target balance. Avalanche can clearly conserve you cash because you are saving on interest costs. The additional amount above the minimum payment you can put towards reducing the debt goes totally against reducing the principal balance. Snowball theoretically might not save you as much with time, yet by using this technique, the quicker checkpoints wind up motivating you to place even more money against your debt.

Avalanche is more about the long haul while snowball is more about changing the way you think. When you see that you are just $60 from cleaning up one of your debts, you could select to toss that $60 right against your debt as opposed to heading out to eat.

Debt help: A real example

The best way to show this is to use an example. I will use the same set of facts and show you how the two methods would work.

Assume that you have 5 sorts of debt:

  1. An auto loan which has a current balance of $18,000, with a minimum monthly payment of $500 a month, at a 4.9% interest rate.
  2. Two student loans. One is down to $20,000. Excellent work at having it that reduced! The minimum repayment a month on that one is $300 and the interest rate is 4.6%. The 2nd student loan has a $10,000 current balance. The minimum monthly payment is $100 and is at a 5.9% interest rate.
  3. You bought some furniture and took advantage of a 24 month zero interest special promotion. You currently owe $7,581, the required monthly payment is $399 and you have 19 months left to go at the special promotion interest rate. Again, it is at a 0% rate of interest. If you do not pay off the balance in the next 19 months, the balance will then click away at 29% per annum.
  4. You only have one credit card. You owe $12,000 and it has a minimum monthly payment of $100. The annual interest rate is 19.8%.

So currently, your total debt is $67,500. Your monthly minimum repayments are a total of $1,429. At that level, it will take you about another 5 years to repay all your debt or some time in 2024 (other than for the furniture debt).

Through your budgeting, you see that you can squeeze an extra $171 out of your monthly budget to put towards your debt repayment. So overall you are paying $1,600 a month towards your debt. In the avalanche method, you will be debt free in February 2023. The interest paid throughout that time is $11,149.00.

Debt help: Repayment strategy options – Snowball vs. avalanche

Under the snowball method, you are done in April 2023. The interest paid in snowball is higher at $14,445.00. This is a difference of $3,296.00. You can certainly put those interest cost savings into your own savings plan. Also under the snowball method, it has you paying off the zero percent interest furniture loan in 13 months. The avalanche method puts the extra money against your highest interest rate credit card debt. It also lets you use the entire remaining 19 months to pay off the principal only furniture loan.

Nonetheless, both methods are valid. Under both methods, you pay off your debt a year earlier than if you did not use either of these methods and putting a bit extra against your principal. It depends what the characteristics of your debt load are. In my example, you would certainly pick the avalanche method, not the snowball method. This highlights the importance of budgeting so that you know what amount extra if any, you can squeeze from your budget towards debt repayment. Also, you can use one of the many free online calculators to figure out both the snowball and avalanche methods. That way you will know what is best for your situation.

The graphs

Let’s look at the graphs of these timelines. As you can see, the avalanche method gives you a steeper downward curve than the snowball method. Again, it is because you are paying off your debt quicker.

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Budgeting and motivation

This also shows us that you have a bit more adaptability if you need to make a reduced repayment one month. Financial instability makes it difficult to toss additional money at debt. So when you’re not obtaining those incentives of getting rid of a kind of debt, it’s a little tougher to be urged. Conversely, seeing that you are chipping away at your debt will motivate you to keep refining your budget so that you can find more money to put against your debt.

The most vital thing is that you have actually developed a budget. Through the budgeting procedure, you found extra savings each month to put towards debt repayment. It’s going to take you a long time to repay your debt if you only pay the minimum monthly amount. Also, you’ll be squandering a great deal of cash on interest if you’re simply paying the minimum.

Are you caught in the debt trap?

Are you caught in the trap of too much debt and only making minimum monthly payments? Do you need debt consolidation Toronto? Are you stressed that future rates of interest increases will make presently affordable debt payments completely unreachable? Is the stress, anxiety, and pain of your debt negatively affecting your health and wellness?

If so, call the Ira Smith Team today. We have decades and generations of experience helping people and companies requiring financial restructuring. As a licensed insolvency trustee, we are the only professionals licensed and overseen by the Federal government to supply financial restructuring solutions.

Call the Ira Smith Team today to make sure that we can start assisting you. We will quickly return you right into a healthy and well-balanced stress-free life. We can create a debt settlement plan just for you to avoid bankruptcy, where we can even make the interest clock stop. This way, all your payments go only against the principal balances owing.

You can have a no-cost appointment to help you to fix your loan troubles. We recognize the pain financial debts and economic distress causes. We can end it from your life. This will absolutely allow you to start a fresh start, Starting Over Starting Now.

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Brandon Blog Post

CREDIT CARD DEBT TRAP: OUR REVOLUTIONARY 4 STEP PLAN TO START BECOMING CREDIT CARD DEBT FREE IMMEDIATELY

Credit card debt trap: Introduction

Many people I help are caught in a credit card debt trap. It’s always good to repay your credit card debt, and now could be a better time compared to ever before to do so.

I have previously written about the Canadian household debt crisis as Canadians take on more debt and average canadian household debt levels increase. Rates of interest are beginning to increase so combining the two creates a mix that can place people in a bind.

Credit card debt trap: A storm is brewing

In December, Statistics Canada reported that the Canadian household debt ratio struck a brand-new high. The ratio of household credit-market debt to disposable income (the key gauge for measuring Canadians’ debt loads) rose to 171.1%.

“Everyone has this sense that there is a storm brewing,” said Bruce McClary, spokesman for the National Foundation for Credit Counseling in the U.S.

“All indications that we’ve seen are that people are carrying higher balances from month-to-month and more are behind on their monthly payments. That’s not a healthy mix.”

Climbing debt levels could suggest people really feel better about the economy. Our concern is that people could be over-extending themselves. Both the US Federal Reserve and the Bank of Canada expect to raise rates later this year, so the cost of lugging credit card debt is most likely to increase.

What can you do try becoming credit card debt-free? Our revolutionary 4 step plan can help get you there.

Step 1. Credit card debt trap: Take control

It isn’t easy to take a difficult look at your financial position, but it is a necessary one. Analyze your financial obligations, and the rates of interest connected to each debt, as well as minimal repayments. Track your costs to get a feeling of what your credit card charges get you every month.

This is the first step in understanding your expenses and cutting back on the ones that are not necessary. To understand where you are going, you should understand where you have actually been.

Step 2. Credit card debt trap: Minimize rates

The typical interest rate on a bank card is about 19 percent. That’s quite high, so you might wish to think about transferring your credit card debt to a card with a reduced or zero-interest first offer rate to help pay it off much faster.

A word of caution: you’ll most likely need to pay a transfer cost in doing so. Also, you will need to pay off the debt prior to that promo rate finishes. Otherwise, the balance at that time is charged a higher interest rate, probably the same or higher than the card you transferred the debt from.

Although I don’t hold out a lot of hope, you can ask your credit card firms if they will decrease your interest rate.

credit card debt trap
credit card debt trap

Step 3. Credit card debt trap: Plan choice

If you simply cannot earn enough to fund your repayments, think about a non-profit credit counselling service. Do not go to any of the debt settlement companies that advertise regularly on television or social media.

All they do is charge you a fee to take down basic information, and then send you to a licensed insolvency trustee. Going first to a licensed insolvency trustee will do more good for you in a first free consultation than the debt settlement company will.

There are 2 typical debt settlement approaches– avalanche as well as a snowball. The avalanche method of getting out of the credit card debt trap works by placing all your money towards your highest possible rate of interest debt. As soon as that’s settled, you begin repaying the following most costly debt till it’s all gone.

In some cases, the snowball approach offers much more inspiration. With this technique, you repay the tiniest debt initially, to increase your spirits. You make use of that energy to pay off what is not the smallest outstanding debt and so on. You are picking up steam like a snowball rolling downhill.

It does not matter which method you use. The important thing is that you start now and stick to it.

Step 4. Credit card debt trap: Adhere to it

Remember your single emphasis ought to be lowering debt, so do not plan any kind of elegant getaways or huge acquisitions in the meantime. You could backslide or strike some roadway bumps yet do not allow that to sap your inspiration.

Now for the tough part. When possible, save some money to aid with unforeseen expenditures that you would normally place on your credit card. This will lessen the amount you would have to charge by paying with cash.

Credit card debt trap: A lengthy and painful trip to get out of it

It’s an incredibly lengthy and painful trip to get out of the credit card debt trap. It also can be a very lonely one. People don’t get into the credit card debt trap overnight, so you can’t get out of it without some hard work.

The Ira Smith Team has helped many people stay the course and be stimulated by their successes. We have helped many people avoid bankruptcy.

Contact the Ira Smith Team today. Your first consultation is free. We will be there with you every step of the way to help you out of the credit card debt trap so you can begin living credit card debt-free. If it isn’t credit card debt you are worried about, but rather other kinds of debt trap you may be caught in, we can help free you from those too.

To deal with debt you need the help of a debt professional – a trustee. Dealing with debt is not something that you can put off any longer. Start the New Year off right by calling Ira Smith Trustee & Receiver Inc. today and make an appointment for a free, no-obligation consultation.

We can give you back peace of mind and put you on the road to debt free living Starting Over, Starting Now.

credit card debt trap
credit card debt trap
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