Prenuptial agreements make families stronger: Introduction
Every time we hear about another celebrity divorce, there’s talk about their prenup. But prenups are not new, nor are they only for the rich and famous. In fact, prenups have been around for thousands of years and historians believe they were first used in ancient Egypt. Prenuptial agreements make families stronger by hopefully, stating clearly what happens if divorce occurs.
The reality is that with the divorce rate as high as it is (over 40% in Canada and over 50% in the U.S.) prenups make good financial sense for everyone. I know it’s not romantic to plan for when divorce or death happen, but should the worst happen, you’ll be prepared and protected. In this blog, we focus on married couples, but keep in mind most of this applies to people living in a cohabitation arrangement too. We are not lawyers and this blog is not meant to give legal advice. We recommend you seek the advice of an experienced family law lawyer in dealing with any situation.
Prenuptial agreements make families stronger: Prenuptial agreements definition
What is a prenup? A prenup, or prenuptial agreement, is a legal agreement entered into before marriage. It establishes the financial and property rights of each spouse if divorce or death happens.
Prenuptial agreements make families stronger: Why prenups in Ontario?
Why should I get a prenup? As we discussed in our earlier blog, very few couples have had serious discussions about their finances before getting married. Many were not aware of the other’s debts or what their soon-to-be-spouse earned.
Even if you’ve avoided the discussion until now, a prenup will put everything on the table. It legally requires both parties to show all of their assets (including any debt) and will help you formalize your plans for the future. A prenup gives you control instead of the courts “just in case”.
Prenuptial agreements make families stronger: The practical reasons
There are many practical reasons why you should get a prenup. If divorce or death happens it can:
Dictate how one spouse’s property can be passed on to children from a previous marriage
Indicate whether one of the parties is to receive alimony
Ensure that upon your death that your assets are distributed according to your wishes
Prevent your spouse from owning a part of your business
Decide who gets custody of the dog, cat or other pets
Prenuptial agreements make families stronger: Don’t be destroyed financially
Prenuptial agreements make families stronger: they aren’t just for the rich and famous – prenups in Ontario are for you too! They can protect you from the financial ravages of divorce.
We’ve seen many couples destroyed financially due to divorce and we could help them get back on track. The Ira Smith Team can help you too. Give us a call today and Starting Over, Starting Now we can set you on a path to debt free living.
Note: We are not lawyers and this blog is not meant to give legal advice. We recommend you seek the advice of an experienced family law lawyer in dealing with any situation.
Canada, the United States and much of the globe has remained in an extended period of reduced rates of interest. But the Bank of Canada, led by Governor Stephen Poloz and the US Federal Reserve, led by Janet L. Yellen as Chair of the Board of Governors of the Federal Reserve System, are the independent bodies in Canada and the US, respectively, that set base rate targets for the financial markets. They have now begun to slowly raise interest rates, so interest rates Canada 2017 are on the rise.
Interest rates Canada 2017: They are on the rise
On July 12, 2017, Governor Stephen Poloz announced the benchmark interest rate increase to 0.75 per cent from 0.5 per cent. Most economists expect that rates will continue to climb at least one more time before the end of the year.
Changing interest rates can impact our ability to service our debt on variable rate or prime based interest rate loans. One way to keep our debt load under control is to adjust our spending and saving behavior to pay down debt appropriately.
Interest rates Canada 2017: They are on the rise – so how much debt should I try to pay off?
When the Bank of Canada signals a rise in its benchmark rate, or a Governor Stephen Poloz speech on interest rates signalling an increase, the Canadian banks then raise:
the interest rate on loans based off the prime rate;and
the interest rate on fixed rate loan products such as mortgages.
When those interest rates rise, we should try to look at paying down some debt so that our total cost of borrowing does not increase. We try to figure out how much debt to pay down by using the following formula:
New Debt Balance = Annual interest expense from older interest rate divided by the new interest expense of the new rate
We use the annual rate of interest of our portfolio before the rate hike due to the fact that we understand that’s what we could currently manage to pay every year. Simply take the weighted average of all the various rates of interest that we’re paying, and separate it by the complete amount of debt we have.
$ 100,000 x 3% = $3,000
Using the example above we understand the annual interest expense I was originally paying was $3,000. So, we could use the formula to figure out how much debt I ought to be reducing to maintain my capacity to service my obligations.
Annual previous interest cost/ the new expense (%) of borrowing = New Debt Balance
$ 3,000/ 3.25% = $92,308
This implies that to keep paying $3,000 a year in interest, I must have a debt balance that’s around $92,300. Because I in fact have $100,000 of debt I have to make some difficult choices.
Interest rates Canada 2017: They are on the rise – so it is now decision time
I could either pay down my debt by $7,692 ($100,000 – $92,308), or accept paying more interest each year as well as make my regular monthly payments. The first alternative implies I will need to sacrifice personal costs to conserve more to pay down my debt. The second choice enables me to spend even more now, however will cost me an extra $250 yearly (in this example, 0.25% x $100,000) that I’m providing to the bank with nothing in return.
It really depends on what the purpose of borrowing in the first place was. Debt to pay for consumer purchases, you would want to try to reduce the debt as quickly as possible.
When you incur debt for investment purposes, then you might prefer to pay a little more tax deductible interest. If a stock’s price typically follows earnings, and earnings will grow, then the stock price should eventually grow as well.
The rate of interest we pay is simply one reason. Changes to our income, financial investment income, household scenarios, place, as well as situations around tax obligations all comes into play when making a choice about debt.
Interest rates Canada 2017: The effect of higher interest rates on the economy
Higher interest rates end up causing a slower economic climate. As people rush to pay for debt or spend more cash to service their present financial debts they must spend much less on consumer goods. Every person should set up a financial portrait that captures their scenario precisely so they can plan for further interest rates in the following 12 months.
Interest rates Canada 2017: What should you do if you have too much debt?
I hope that you have found this vlog helpful. If you’re looking for ways to end your financial debt callIra Smith Trustee & Receiver Inc. Our strategy for every single person is to develop a result where Starting Over, Starting Now comes true, starting the minute you stroll in the door. You’re just one call away from taking the necessary actions to get back on the road to leading a healthy and stress free life.
My top 10 debt reduction program steps is for anyone to start immediately to reduce or eliminate debt in order to regain control of your life. By following these steps, there is no need for you to seek out a debt settlement company. I am giving you a foolproof program for free. Debt settlement companies would charge you thousands of dollars for this information!
1. Debt Reduction Program: Say No To Debt
When you have determined, “I’ve had it”, take your charge cards out of your wallet. Then follow your budget (which means you have one) as well as swear NO MORE DEBT. No ifs or buts … no more debt, NO MATTER WHAT. Either lock the charge cards away, or even better, cut them in half and send them back to each issuer. Ask that they no longer send you any and that your account should be capped at its current balance.
2. Debt Reduction Program: Take Your Head Out of the Sand
Determine your revenue, your monthly costs, and your financial debt total amounts. Acknowledge your past errors with money and progress. Today is a brand-new day as well as you are no more living in denial about your financial resources.
Every financial choice from now on should be based upon a plan. A plan that is based upon realities. Facts from your budget as well as financial goals.
3. Debt Reduction Program: Develop a Monthly Budget (with your spouse or partner if you are not single)
If you are to do just one of these ten practices, please do this one. Living by a written budget is the ESSENTIAL trick to living a financially secure life. When you prepare a monthly budget plan, there was no other way in refuting that you were investing $400+ in totally optional spending on non-essential items; $20 there and $50 here that were amounting to $100’s every month … WASTED!
Your written spending plan provides you with a strategy to spending cash on what you “need” as well as “want” and NOT losing it away. Do you recognize the ordinary person making $50,000/ year will have over $2 MILLION go through their fingertips??? Don’t YOU want to have a plan for those $$$?
4. Debt Reduction Program: Cash not credit
Yes, using cash can be bothersome and a hassle but it is IMPOSSIBLE to spend greater than you have and go over budget. It also hurts a lot more to use cash money then simply swiping plastic.
Those adorable shoes do not look so cute when you think of handing over the last bill in your pocket. It would most likely be easier to live without the most up to date digital gadget when you think of taking all that cash out of your wallet. At that point, your current phone, while not the latest model, looks pretty useful all of a sudden!
Try it. After a few months you will see how your costs reduce. Your behaviour will transform so significantly that you will be shocked how much money you have used unnecessarily in the past.
5. Debt Reduction Program: Priorities
Your financial decisions mirror what you as well as your household regard as a top priority in your life. This will be noticeable in your month-to-month budget plan.
Establish your family’s top priorities. Make certain your regular monthly budget mirrors these top priorities. With a proper budget, you may begin to seem like “inadequate me, I don’t really go out to dinner.” Remember your family has various top priorities and you are compromising one meager dish at your favorite restaurant to have a lifetime of financial safety and security. This definitely puts things in perspective when you are in a moment of weakness.
6. Debt Reduction Program: Remove Temptation
Do not set foot in your preferred non-essential shop. If the lure is not there, you will not spend money on things you do not need. Attempt to restrict on your own to only food store. Shop with a checklist as well as stay with the checklist.
If you have difficulty with internet shopping, unsubscribe from store e-mails that promote sales and new products. You are as well concentrated and functioning also hard on your financial goaks to have a slip up on something that was not in the budget plan.
7. Debt Reduction Program: Free Entertainment
Sometimes this financial debt elimination phase is going to seem like it has drawn out all the “enjoyable” things in your life. Just because you are on a tight budget does not mean you shouldn’t enjoy your new life.
Choose cost-free or cheap entertainment. Activities such as walking, barbecue in the park, borrow publications & flicks from the library (yes, they still exist!), free concerts in the park, playing cards and other games, volunteering your time, digital photography, checking out a museum or historical site on a “cost-free entry day.” The possibilities are unlimited, be innovative!
8. Debt Reduction Program: Decrease Food Expenses
Food can be one of the highest costs in your budget plan (2nd to housing). Great news, there are MANY ways to lower the cost of food.
Grocery Store: Have a listing. Use “Budget Friendly Recipes” to make a dish strategy to stay clear of food waste. Do not acquire or dramatically decrease the buying of already prepared foods (anything pre-cut, pre-cooked, pre-prepared).
Dining establishments: Avoid them as long as possible. Cooking a meal in the house will certainly ALWAYS be less costly than eating at a restaurant (unless somebody else is picking up the tab). When you do eat at dining establishments use vouchers, Groupons, happy hour price cuts, as well as basically anything to lower the price.
9. Debt Reduction Program: Team Work
I could not stress enough how crucial it is, to collaborate with your spouse or partner with your financial resources. You are in this with each other. When one of you is having a harsh day, the other needs to urge and remind you why you are sacrificing, why you got on this trip.
One of you might take on the role as the captain, pushing your “team” to the absolute limitations to pay off financial obligations. It might be the spouse or partner who is the MVP, that continuously gets you through the battles and the “bad days”.
10. Debt Reduction Program: Develop Goals
When your financial priorities are established, it will be simple to jot down goals. I recommend composing one or two short-term financial objectives. Your financial goals may be something like:
Eliminating our home equity line of credit balance by February 2019
Having a cash reserve of $2,500 in case of an emergency
Reward ourselves by taking at least 2 vacations in 2020 because of what we have accomplished so far
Now that you have your objectives developed, this is where you need to circle back to make sure that it is accounted for in your written budget. Your objectives will certainly aid you to stay focused and also provide you inspiration to continue your financial trip.
Debt Reduction Program: What if you haven’t started to reduce debt early enough?
Are you too deep in debt? Is the monthly interest charge on your credit cards more than your monthly amount available to pay down the credit card debt? Being threatened with lawsuits or being sued?
Then you need to consult with a licensed insolvency trustee for some surgery. All of the 10 points listed above will be part of your financial rehabilitation. However, you need to have the time clock stopped now to give you breathing room.
A licensed insolvency trustee can develop such a plan for you and get you the relief you deserve and need. The Ira Smith Team has much experience in handling debt problems like yours. We have helped many people and companies return to financial health and live a stress-free life.
Contact the Ira Smith Team today for your free consultation. We will develop a practical plan for you to get out of debt and regain control over your life, Starting Over, Starting Now!
Nearly 75% of Canadian property owners would certainly have problem paying their home mortgage each month states a Manulife Bank homeowner debt survey. This is the case if their monthly payment boosted by just 10%,
The financial institution surveyed 2,098 home owners. They were between the ages of 20 to 69. They had family incomes of $50,000 or greater. It was an online survey conducted in February 2017.
Since these kinds of surveys typically aren’t randomized, experts claim the internet surveys do not have a margin of error. They state that the study however highlights simply exactly how limited the spending plans are for lots of Canadians.
38% of those surveyed claimed they might endure a repayment increase of between 1% to 5% before having a problem; and
20% stated they might tolerate an increase of between 6% to 10% before feeling the pinch.
Manulife Bank homeowner debt survey: Almost 75% could not handle a small rate increase
This poll indicates 72% of house owners surveyed could not endure an increase of 10% from their existing record low rates. Let me be clear. We are only talking about a 10% increase; not an increase to 10%. So, if you have a mortgage with a 3% rate of interest, 72% of those surveyed could not make ends meet with an increase in their mortgage interest rate to 3.3%!
That’s an unsafe area to be, with rate of interest readied to increase eventually.
“What these people don’t realize is that we’re at record low-interest rates today,” said Rick Lunny, president and CEO of Manulife.
Manulife Bank homeowner debt survey: Many homeowners have less than $5,000 in savings for an emergency
Overall, almost one-quarter (24%) of Canadian house owners surveyed claimed they have not been able to generate enough funds to pay an unforeseen expense in the past year. And, most are not healthy to weather any kind of economic tornado. About 50% of those questioned had $5,000 or less in reserve to manage an economic emergency. One fifth of them have absolutely nothing saved for a rainy day.
One quarter of millennials questioned had no savings. The same was true for 1 in 6 boomers.
Manulife Bank homeowner debt survey: If the main income earner lost his/her job, it would take no more than 3 months to be in mortgage default
The study discovered that 45% of millennial house owners– those aged between 20 to 35– would certainly have one of the most problems making their mortgage payments within 3 months, if the main income-earner in their family were to suddenly end up being out of work.
Millennials were additionally the ones that typically had the highest amount of per head home related financial debt, at $223,000. Gen X-ers (those aged 36 to 52) had about $202,000 owing. The boomers (ages 53 to 70) had $180,000.
Manulife Bank homeowner debt survey: Manulife CEO states millennials not ready for a financial emergency
Lunny claimed many millennials are not ready to manage an economic emergency because of a poor or no financial education and rising debt. They have seen their home loan related financial debt increase greater than any other generation, per the study.
The study revealed a couple of various other distinctions between the generations. Practically half, (45%), of millennial home owners stated they got funding from their family when acquiring their very first residence. This compares to 37% of Generation X’ers and 31% of baby boomers.
Manulife Bank homeowner debt survey: What should you do if you have too much debt?
Could you handle all your debt obligations if on your next mortgage renewal, you had a mortgage rate increase of only 1%? Do you not have any money put away for a financial emergency? Do you worry how you are going to pay your other bills on time?
The Ira Smith Team is here to get you back on track to debt free living Starting Over, Starting Now. We can solve your problems with immediate action and the right plan for moving forward. All it takes is one phone call to book your free, no obligation consultation. Call us now.
Cars can mean many things to us including freedom, status, power, sex appeal or basic transportation. It also seems to mean auto loan debt. Fueled by low-interest rates, 2016 saw Canadian passenger car sales hit a record high for the third straight year. It appears that 2017 is continuing the 2016 trend; not just for car sales, but also for Canadians’ willingness to take on auto loan debt.
But, can you afford that car you’re driving? Or will it put you into debt beyond your means to repay? And in the wonderful world of debt, car debt may be bad debt. So, if you have wanted to start taking on auto loan debt but were afraid to get started, this blog may help you decide what to do.
Auto loan debt: Why may car debt be bad debt?
According to DesRosier Automotive Consultants about 85% of car purchases are by Canadians are purchasing passenger cars with debt. “In Canada, automakers are selling about 41% of vehicles with loans of at least six years or leases of at least five years”, said Mark Buzzell, chief executive officer of Ford Canada.
A new car will lose 60% of its total value over the first five years of its life (CARFAX)
Longer-dated loans significantly increase the chance that an owner ends up owing more than their car is worth (Financial Consumer Agency of Canada)
The share of Canadians trading in vehicles with negative equity rose to 30% in 2015, and on average they were underwater by about $6,700 (J.D. Power)
Auto loan debt: What can be done to prevent Canadians from buying cars they can’t afford?
Ford Motor Co. is seeking to limit the growth in long-term auto loans and leases in Canada. Ford wishes to slow down consumers trying to stretch out payments for as long as eight years to afford a car. However, regardless of what Ford’s doing, low-interest rates and longer amortization makes buying cars we can’t really afford an attractive proposition. People are looking merely at the monthly payments to figure out how large and fancy a vehicle to buy. They are not considering their true needs and affordability.
As of February 2017, sales of luxury cars accounted for nearly 60% of Canadian vehicle sales. This is five times their normal share, according to a March 13 Scotiabank report. The reality is that we need to exercise common sense and financial restraint when purchasing any big-ticket item. And let’s not forget about using a budget to help live within our means.
Auto loan debt: What to do if you have too much debt
Are you now in debt because you purchased or leased a car you couldn’t afford? The Ira Smith Team is here to get you back on track to debt free living Starting Over, Starting Now. We can solve your problems with immediate action and the right plan for moving forward. All it takes is one phone call to book your free, no obligation consultation. Call us now.
Sales of brand-new cars and trucks in Canada struck an all-time high earlier this year. It’s been a constant wonderful market in the car business since interest rates have remained so low. With so many people buying new vehicles financed by debt, that is what has led to Moody’s downgrades Canadian banks.
Exactly what’s great for Canada’s auto dealerships isn’t so excellent for Canada’s most significant financial institutions. Fears stay and are growing about the overheated Canadian real estate market.
Moody’s downgrades Canadian banks: Moody`s concerned over Canadian consumer debt
Credit monitoring company Moody’s fears Canadians have as well too much automobile and credit card debt and home mortgage and home equity loans. Moody’s states those variables have the financial institutions prone to losses.
As you include more consumer debt in the Canadian economy, it ends up being riskier. Moody`s fears that the Canadian banks will be less able to soak up any more shocks to the economy. Simply put, there’s a high danger of funding defaults that would harm the Canadian financial institutions. That’s why the reduction in the debt ranking.
Moody’s downgrades Canadian banks: Don`t worry, they are still extremely highly ranked
The financial institutions affected are all the large ones: Toronto-Dominion, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank as well as the National Bank of Canada. Every one of those huge 6 had their standard credit score ranking devalued by one notch. Still excellent, yet lower to where they’ve been.
The large 6 financial institutions in Canada are still extremely highly ranked establishments. On an international basis, they would certainly stay in the leading 10 percent. This is not a dangerous situation yet; it is a warning for one sector of Canada’s population.
Moody’s downgrades Canadian banks: The Canadian government can`t do anything more
Moody`s states the federal government has done exactly what they could to cool the hot real estate markets. To reduced credit danger further there are only just 2 points that would help: (i) a more powerful Canadian economic climate; or (ii) much less loaning and borrowing.
Moody’s downgrades Canadian banks: What to do if you have too much debt
Packing up on too much financial debt is never ever a great suggestion. Are you bewildered by financial debt? CallIra Smith Trustee & Receiver Inc. today so we can give you a clear road map on how you can navigate through your financial debt. Our licensed professionals will help you reduce your debt and allow you to reduce stress and regain control and peace of mind. Starting Over, Starting Now you could be on your way to debt free living.
Difference between debt settlement and consumer proposal: Forced to pay money they can least afford
Cases handled by a Licensed Insolvency Trustee (LIT) that were referred by these types of settlement companies generally wound up paying much more for their insolvency case.
The debt consolidation companies called for a debtor to authorize a costly contract for speaking with the debt management company before being presented to a “picked LIT”. The people normally comprehended that the only function of the LIT as being restricted to the filing of the consumer proposal created by the settlement company!
In cases evaluated by the OSB, the consulting charge section of the contract contained a large amount for the debt consolidation company’s “help”. It was in the range of $2,400 to $4,200. For smaller consumer proposals, the OSB found that the consulting charge typically varied from 20% to 40% of the amount of the proposal.
Therefore, my read of this leads me to believe that certain LITs cooperated with such settlement companies to force insolvent debtors to pay thousands of dollars more than they otherwise needed to. These people could not afford this and did not deserve to be treated this way.
Debt specialist charges were purported to cover the expense of advising, conferences, recommendations as well as prep work of the consumer proposal. In all situations, the costs paid to the debt management company were IN ADDITION to the fees established under the Bankruptcy and Insolvency Act (Canada) charged by those LITs.
Difference between debt settlement and consumer proposal: If that isn’t horrendous enough, the debt management company sold them a larger bill of goods!
OSB’s study discovered that debtors were often marketed more products by the debt settlement companies. As a result, there were billings for extra recurring costs throughout the life of their consumer proposal!
The products the debt management companies pushed on these vulnerable people included:
All products carried either high-interest rates or high price tags.
Difference between debt settlement and consumer proposal: Forced to pay more than they should have
A technique identified throughout the OSB’s review entailed advertising and marketing “proposal insurance coverage”. This was normally billed as a month-to-month expenditure at a price of around 10% of the worth of the consumer proposal. This financing had recurring repayments supposedly for “credit rating fixing”.
In one instance, a debtor with a $31,900 consumer proposal signed up for proposal insurance coverage, structured as a loan. That base cost was about $6,300. Various extra fees, the month-to-month management cost as well as a 15% interest rate, the insurance coverage priced out at $9,150.
So, with the debt management company’s management fee of $2,300, the consumer proposal that the creditors voted to accept in the amount of $31,900 cost the insolvent individual $43,350!!! In my view, being merely associated with this type of behaviour is against the BIA, OSB Directives and the Canadian Association of Insolvency and Restructuring Professionals code of conduct for its members. As a LIT, I would never be associated with such disgraceful behaviour.
Difference between debt settlement and consumer proposal: Consumer proposals are like a 5-year interest-free loan, so why would you borrow to pay it off early?
An additional pattern observed in consumer proposals submitted by LITs dealing with debt management companies was the intro of “price cut terms”. This arrangement is for enticing the debtors to borrow money under arrangements made by the debt settlement company.
Incorporation of a discount rate provision provokes a debtor to become part of a brand-new as well as expensive loan scheme. To capitalize on a 25% discount rate condition in a $10,000 proposal, a debtor would finance $7,500. With paying $1,400 in compulsory charges, this brought the lending overall to $8,900. At a promoted rate of interest of 22.99 %, with a payment timetable of $214 over 84 months, the borrower would certainly pay $10,475 in charges as well as a rate of interest, for an overall of $17,975.
A consumer proposal is like an interest-free loan. The same debtor with the same beginning consumer proposal of $10,000, would only pay that amount if they went directly to the LIT first. The debtor would have had a maximum of 60 months to complete making the payments with no interest charges at all. A savings of $7,975 and lower monthly payments.
As you can see, involving the debt settlement company increased the cost for an insolvent person dramatically for no value.
Difference between debt settlement and consumer proposal: Other findings
Other findings by the OSB include:
the LIT files did not contain any obvious evidence of debt settlement company certification or experience in credit counselling or the counselling of insolvent debtors;
consumers who filed with a LIT through the debt settlement company did not have a good understanding of the insolvency process, the options that were available to them or the other charges they were paying to the debt settlement company
the consumers were not aware that they could have avoided charges such as paying a debt consultant to prepare the consumer proposal
that the documentation made ready for the consumer proposal filing by the debt settlement company and used by the LITs contained many errors
Statements of Affairs, as well as Income and Expense Forms submitted, were incorrect in different ways
Debt settlement company fees were not disclosed
Real estate was always undervalued compared to LIT files where there was no involvement of a debt settlement company
Difference between debt settlement and consumer proposal: What you can do
The OSB is considering its next steps. The OSB is requesting comments. We have already provided ours. Our recommendation was that all LITs who cooperated with debt settlement companies as we have described here should be brought up on disciplinary charges by the OSB. If you agree that this way of doing business on vulnerable and unsuspecting consumers who are truly looking for professional help must stop, please click here to offer your own comments to the OSB.
In the meantime, if you have too much debt, please DO NOT be fooled by the debt settlement companies. Stay far away from them. Instead, contact a LIT directly.
We are debt professionals who will evaluate your situation and recommend which debt relief options are right for you. We will do so in a free consultation. A consumer proposal is one option; there are others as well.
Contact Ira Smith Trustee & Receiver Inc. today for a free consultation. There is no need for you to pay fees to a debt settlement company when you can get the same information from us for free.
You’ll be in good hands and Starting Over, Starting Now you can be well on your way to living a debt free life.
Co-signing on a credit card for a family member or a friend may seem like the right thing to do. However, do you really understand what you’re getting into? Too many people do not fully understand the co-sign credit card meaning. This is risky business that can cost you a lot more than you bargained for.
Co-sign credit card meaning: What does co-signing on a credit card involve?
The co-sign credit card meaning is that when you co-sign on a credit card it’s the same as getting a credit card yourself. You are 100% responsible for the debt. It doesn’t matter that none of the charges are yours and that you are not the primary card holder. The minute you co-signed on the credit card, you guaranteed repayment. If the person you co-signed for doesn’t make a payment for any reason, you’re on the hook for the money – all of it.
Co-sign credit card meaning: Why are you being asked to co-sign?
If you’re being asked to co-sign on a credit card it’s typically for one of three reasons:
The person asking you to co-sign has a poor credit history and is deemed too great a risk by the credit card company. This should give you cause to pause.
The person is very young and has no credit history (and not earning enough money to be considered a good credit risk). This should also give you cause to pause.
You are co signing for your child for a credit card with a very low limit as part teaching your child to use credit wisely and to help them get a good credit score. This includes the parent willing to cosign for a credit card for a child under the age of 18.
The only one of these three possibilities that we actually think is good is number 3; a parent willing to co sign a credit card with a very limited credit limit while monitoring their child’s use as part of giving a financial education.
Rather than co-signing, you may wish to consider helping your friend or relative get a secured credit card. Put up a modest deposit for them. At least this way you limit your potential exposure.
Co-sign credit card meaning: How can co-signing on a credit card negatively impact you?
As we’ve already mentioned, you will be on the hook for the money if the primary card holder doesn’t pay. However, there are several other ways in which you can be negatively affected.
If there are any late payments on the account for which you co-signed, that can also negatively impact your credit score.
The credit card company can increase the amount of available credit on the card without with the co-signer’s permission (if the borrower is over the age of 21). You could be on the hook for a lot more money that you anticipated.
Co-signed debt Is part of the calculations that decide whether you’ll get approved for any kind of borrowing, including a mortgage.
Co-sign credit card meaning: What to do if you have debt problems
Co-signing on a credit card can be risky business and land you in financial hot water. Are you experiencing financial distress as a result of co-signing on a credit card or otherwise?
How to improve credit score: The Financial Consumer Agency of Canada alert
The Financial Consumer Agency of Canada (FCAC) is alerting people who could no longer stay current with their debt payments to be mindful when looking how to improve credit score.
Some businesses are misleading consumers by guaranteeing quick and easy solutions to help settle their financial debt or improve credit score. In many cases, consumers could wind up in a worse economic scenario compared to before they got aid.
How to improve credit score: Beware of credit repair firms
It’s crucial to understand that these firms:
cannot make sure they will solve your debt problems
could not swiftly and quickly repair your credit rating
need to not motivate you to get a high-interest loan as a service until other loan alternatives are available
How to improve credit score: What you should do before starting to repair your credit
Before registering for help to repay debt or repair or improve credit score, customers need to:
get suggestions from various reputable sources such as an accredited financial consultant, an approved credit counsellor or a licensed insolvency trustee
do inquiries and compare options
never be pressured to register right away
check out the small print and recognize the conditions before authorizing a contract or an arrangement
“It’s important for consumers to understand what companies can and can’t do when offering services to help with debt repayment or credit repair. The Financial Consumer Agency of Canada has information to help consumers better understand the types of services available to them and where to get help. Having the necessary information is the first step to empowering consumers to make informed decisions and meet their financial challenges head on.”
How to improve credit score: Beware of credit repair firm tricks of the trade
Some firms or agencies declare that they can swiftly fix your credit report. It’s difficult to change or erase info that’s part of your credit rating, unless a detail is incorrect. Improving your credit history will take some time. You need to prove that your credit practices have enhanced by repaying your financial obligations on time.
Some firms could likewise offer you a loan suggesting it will certainly aid in fixing your credit history. The firm could assert that making timely payments on this loan will repair your credit report. When you sign up for this type of loan, you never in fact receive any cash because the company will tell you the financing will cover its services or programs. Rather, you make normal payments to the company to pay off the loan.
Be aware; this type of loan generally has a high rate of interest. This solution does not help cut any of your other financial obligations. You are required to keep making your payments on any other financial debts you owe. You could only be left with even more debt and no change to your credit rating.
How to improve credit score: What the Canadian government advises you to do
The Canadian government recommends that you speak to a licensed insolvency trustee. Although the challenges are enormous, they are not insurmountable. If you and your spouse have too much debt because of financial infidelity or for any other reason, you need to contact a licensed insolvency trustee (LIT) now. Through financial counselling, a LIT can aid in getting the resources you need to fix the root causes of the financial infidelity and to deal with the debt that you and your spouse cannot repay.
You need the Ira Smith Team. We’re experts in dealing with debt. No matter how you got into difficulty we can help return you to financial well-being. Contact us today and free yourself of debt Starting Over, Starting Now
I recently read an article in Forbes that really shocked me. The article was about how aware we are about what we spend each week. These expenses could be anything – gas, utilities, groceries, meals out, movies, junk food… They asked three people to estimate how much their weekly expenses were and much to my surprise, they all underestimated by 30% – 40%. The results of this article are a neon billboard for the necessity and importance of a budget starting with a weekly expenses sheet, and a wakeup call to everyone still spending money without a budget and a plan.
Weekly expenses sheet: How many Canadians use a budget?
Only 40% of Canadians use a budget; however 90% of Canadians say that they have more debt today than they did five years ago (Practical Money Skills).
Weekly expenses sheet: Why are so many people reluctant to use a budget?
People think that using a budget will force them to cut out many of the things that they love to spend money on. And they work on the belief that better times are ahead – they’ll be making more money and some even believe that they are destined for a lottery win. Ignoring the realities of accumulating debt can spell financial disaster. People don’t want to face the harsh reality that they are spending more than they earn. A proper budget, which includes a weekly expenses sheet, would force those who overspend to deal with their debt reality.
Weekly expenses sheet: What can a budget do for you?
Budgeting can greatly improve your life and help you take control of your financial future. It will:
Calculate your monthly expenses – once you know what your monthly expenses are you can allocate money for those expenses
Prepare for the unexpected – budget for unforeseen expenses like an unexpected car repair bill or dental bill
Improve your credit score – sticking to your budget means that your bills will be paid on time, which means that your credit score will improve
Get out of debt/Stay out of debt – a budget will align your income with your expenses. Sticking to your budget will allow you to pay down your debts and/or stay out of debt
Weekly expenses sheet: What to do if you have too much debt?
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Weekly expenses sheet: Introduction