As a consumer, you have access to many different types of credit. Credit allows you to make purchases when you do not have available cash. From credit cards to major loans such as mortgages, credit can be a good thing. However, if not managed properly you can find yourself in debt which can lead to major issues, including the loss of your home and assets, and even bankruptcy. Credit and debt management services provide you with advice on how best to manage your credit and make the right choices so you do not overspend.

Understanding Credit Management

Credit management provides you with guidance on your finances from the banks you use to the types of credit that will work best for your needs. More importantly, they also offer advice on how to manage the credit you have and also how to manage and pay off your debts. They look at things such as what types of credit you have, how much is owed for each loan and credit card, and what interest rates you are paying. From there they can help determine where changes can be made to help you pay down your debt quickly and reduce the amount of interest you are paying each month.

Understanding Interest

Many people are unaware of how much impact interest can have on their debt. In general, you want to pay the lowest interest possible, especially in cases where you will be carrying your debt for longer periods of time. For example, if you have credit cards at a very highinterest rate of say 19%, but you pay your balance in full each month, then the 19% interest rate is not as scary. However, if you tend to carry a balance on your credit cards, have a high balance, and can only afford to pay the minimum amount each month, then that interest rate is going to eat into your income and make it harder and harder to repay your debt.

Understanding Consumer Credit

Consumer credit allows you to purchase goods and services without the need to pay cash up front. When credit is used, debt is incurred and interest is applied to that debt. You can find many different forms of credit including credit cards, lines of credit and various types of loans such as mortgages, student loans and car loans. There are some advantages to consumer credit including:

• It can provide emergency funds for temporary financial challenges or unexpected issues such as home or car repairs
• It allows you to purchase goods and services you might need and pay for them at a later date when funds are available
• It helps you to build up a good credit rating which you will need to qualify for a major loan such as a mortgage

However, there are also many disadvantages to consumer credit including:

• Carrying debt is very expensive, especially when paying higher interest rates, or just paying the minimum monthly payments
• It is very easy to get into debt which quickly eats into your income
• A poor credit score can cost you important things such as the chance to own a home or car
• Failure to repay your loans affects future interest rates when you apply for further credit
• Carrying debt is extremely stressful and can even lead to the loss of your home, car and other assets
• Bad credit ratings stay with you for life if you do not make arrangements to repay your debt and rebuild your credit score

Benefits of Credit Management

Credit management provides you with professional advice that allows you to have credit without carrying unmanageable debt. A credit management advisor can address all of your credit opportunities, and advise how much credit is safe for your income so you never end up with unmanageable debt. However, if you already do have unmanageable debt, they will work with you and your creditors to find solutions that will help you pay off your debt and get your finances back on track.

Credit advisors can assist in a number of ways to suit your individual needs. We commonly tackle debt in two ways:

Option 1: Debt Consolidation

Debt consolidation is perfect if you have found your debt has become too difficult to repay, yet you are still not in over your head. This easy solution allows you to put all your loans together so you have a single monthly payment to pay off all of your debt. We work to find you a single loan that is then used to pay off each individual creditor in full. You then repay your single loan each month with a single repayment plan. Sounds easy right? It really is.

Another bonus to debt consolidation is that you will almost always have a lower interest rate, especially if your debt was built up with credit cards. This lower interest rate will help you pay off your debt faster. The best part of debt consolidation is that it will also provide you with more disposable cash so you can avoid adding to your debt. You can start paying with cash and live a less stressful life.

Why Consider Debt Consolidation?

There are many benefits to debt consolidation including:

• No more stressful calls or letters from creditors and collection agencies
• Lower interest rates
• One easy payment per month
• Improving or protecting your credit rating
• Avoiding a consumer proposal or bankruptcy

Option 2: A Consumer Proposal

If you find you are beyond the point of managing your debt then your second option is consumer proposals. A credit advisor will work with you to come up with modified payment plans and negotiate with your creditors. They will first review all of your debt in order to come up with a plan that will suit your current financial situation. Then they will speak to your creditors and negotiate on your behalf to arrange to allow you to make lower monthly payments, remove interest, have more time to pay off your loan and in some cases even lower the amount you owe. The best part of a consumer proposal is that once it is filed, it will end all of the collection calls and you will also stop incurring interest until an agreement is made.

Once they file the paperwork, your credit advisor will let you know what agreements have been made, and you will pay a single payment amount through their office, which will then be paid out to your creditors, saving you the headache of dealing with them.

The benefits of filing a consumer proposal include:

• Monthly payments are fixed and reduced
• You stop paying interest
• Creditors will stop contacting you
• Accepted proposals are legally binding
• You’ll avoid bankruptcy

With a consumer proposal, you will face some damage to your credit score. However, unlike bankruptcy, you can quickly begin to rebuild your credit and get back on track to an excellent rating.

Credit management for consumers helps keep you on track before things become dire. However, if things have already become unmanageable, credit management will help you regain your financial legs so you can get back on track.

For more information about consumer credit management, call Charles Advisory Services at (416) 915-9007 or contact us here.