Many people need a significant event to realize that they are in too much debt. Some people don’t realize this until they start receiving calls from collection agencies. Others only understand this when they are under wage garnishment. But, whatever the trigger, the solution they choose to try to get out of will be crucial on their finances and debt management.
In a panic, people are desperately looking for money to settle their debts. Often, they turn to financial institutions for a loan. This is called debt consolidation.
If granted, they have a break. They will be able to take this opportunity to put their finances in order and take measures to prevent the situation from repeating itself.
On the other hand, if they are refused, they will have to consider other possibilities. Unfortunately, many of the last resort solutions involve significant financial risk without offering a guarantee of success. Caution is, therefore, required.
The five worst solutions to settle your debts
Get a new credit card
This solution may be suitable if certain specific conditions are met. But, in my experience, this is rarely the case.
First, make sure that you will be able to pay off the credit card balance when due. Otherwise, you will only push the problem away.
Then make sure the new card has a lower interest rate than the tickets you already have. However, beware of promotions. Some companies do offer products that seem advantageous at first glance, but which are not entirely. For example, the interest rate for transferring balances from your credit cards may be beneficial at first but increase after a few months.
Besides, almost all credit cards for over-indebted people have annual fees. You have to wonder if it is a good idea to get such a card when you are specifically trying to reduce your expenses to pay off your debts. Certainly not!
Credit card cash advances
Credit card cash advances can help out if something unexpected happens. There is, however, a big problem if you use it to pay off debts.
The trouble is that interest calculation works differently for cash advances. Unlike purchases made with credit cards, interest on advances applies as soon as the money is withdrawn. You, therefore, do not benefit from the grace period granted for a purchase. Besides, since the interest in this kind of transaction is close to 20%, your debt balance will increase very quickly.
No one will do you a favor if you need money to pay off debts. Especially not a pawnbroker!
To borrow money in this kind of business, you will have to leave the property as collateral. Unsurprisingly, the value of the goods that the owner of the pawnshop agrees to pawn will be much higher than the amount of money that will be loaned to you. Therefore, you are taking the risk. If you can repay the pawnbroker, he will charge interest charges. If you do not succeed, he can resell your goods and pocket a nice profit. Paying off your debts will have cost you a lot more than expected. Not to mention that you may even have lost memories that belonged to your parents or even family television.
In such circumstances, why not use classified ad websites like Kijiji or LesPAC? You could sell goods there that you no longer use yourself. You can then keep all the proceeds of such sales.
To qualify for a payday loan, you must have a stable source of income. The lender will advance the money back to you (in theory) when you receive your pay.
A payday loan is a costly way to borrow money. Interest rates are legally capped at 60%. In some provinces, however, this limit is higher for loans under $ 1,500.
Either way, some lenders are quick to break the law and charge even higher interest. They generally add fixed administration and file opening costs, which will increase the total amount to be reimbursed accordingly.
Taking out a payday loan to settle your debts is a risky bet. The risks of entering the chronic debt cycle remain very real.
Casinos, lotteries, and games of chance
Fiction films where a character solves his debt problems by winning a large sum of money at the casino are viral. But, in life, do not bet on your good fortune or your poker skill to settle your debts.
Ineffective, this kind of “solution” can even cause a panoply of additional troubles.
If bankruptcy is your last resort to free yourself from your debts, the court may impose more onerous terms. If it is shown that you played at the casino while you were insolvent, for example, you may have to make more payments during the bankruptcy process.
The casino should never be seen as a potential source of income. It must always remain entertainment.
The best solution to settle your debts
At the risk of being accused of preaching for my parish, the best solution to pay your debts is to meet with a bankruptcy trustee. The trustee will then draw up your balance sheet and make your budget. He will be able to understand your situation and recommend the best solution for paying off your debts.
In many cases, it will even be possible to avoid bankruptcy. Also, the first meeting is free, which means that you have nothing to lose.
If you are looking for a solution to your debt overhang, get the help you need.
Is There Such a Thing as a Good Payday Loan?
There is a whole week left before payday, and the car has just broken down. The mechanic announces the worst news – $ 750 to fix everything. Unfortunately, you only have $ 500 left to cover the cost of repairs. Payments for Hydro and cell phone services of $ 350 will be collected by direct debit. Then, worst of all, you have to shop for groceries; there is nothing at home to make supper. The family still needs to be fed. You use the bank application to “fix” something, but no, it doesn’t hold. Credit cards are overloaded, and the checking account is dry.
Impossible not to repair the car, but also impossible not to shop for groceries. Called into the seat, anxious, ashamed and desperate, your thoughts alternate between guilt and idle thoughts to get you out of this mess.
Looking up, a trade sign across the street catches your eye. It’s almost a divine intervention! A large, powerful neon sign on top of the old store announces “LOAN ON SALARY, 100% APPROVED, 100% GUARANTEED”.
“That’s it, that’s the solution! I am applying for a loan until the next payday, and everything is settled by next week.”
If at least it is evident that it was a decoy rather than a blessing from heaven. Believing you are saved, your real problems begin.
For more help about your debt settlement or payday loan debt help you can visit online.