They say that time heals all wounds. Unfortunately, this is not true when it comes to personal finances. Sometimes, everything can come crashing down in a matter of months.
Charles is 42. He has been working in the same gouvernment department for nearly 15 years. Marianne is an elementary school teacher. They have two kids aged 9 and 12. Their family is always on the go: extracurricular activities, sports, community work, camping, piano lessons and gymnastics. Obviously, they need a second car to keep up the pace.
Year in, year out, things are tight, but they usually make it work. But a year ago, a few unexpected expenses threatened to destroy their delicate balance. The house’s 30-year-old roof needed to be replaced, the oldest child needed braces and the second car needed some repairs.
Charles juggled two credit cards for 6 months, plus a line of credit from the bank and the mortgage. Marianne knew that Charles would do anything to fix things… except ask for help.It became a touchy subject. After 8 months, they were not even able to pay the minimum on their credit cards. Creditors started calling more and more, until a bailiff came knocking on their door to take the furniture.
They went to their financial institution for help but it was too late for a consolidation loan. A few months earlier, everything would have been different. The key factor in being able to consolidate your debts is having a good credit rating. Late payments, especially when they are recent, scare financial institutions off and prevent a lot of people like Charles and Marianne from getting a loan to pay off their credit card debt.
In this case, Charles and Marianne used a consumer proposal to consolidate their debts. The proposal is noted on their credit rating, but the damage was already done and if they didn’t do anything, they would have been forced to only pay the interest, without ever reducing the total amount due. Because they had a good income, they still had to pay back a big part of the principal ($30,000 of $32,000) but the fact that there isn’t any interest on the amounts that were repaid through the consumer proposal means that their monthly payments went from $800 to $500 a month for 60 months.
How do you know when you have to take action before it’s too late? When you get one bad financial surprise after the next or you’re juggling credit card debt—you need to pay attention to these warning signs. A stain on your credit report only disappears with time, a long time…
The best medicine is prevention.
Discover how to offer your creditors a lower settlement based on your ability to repay.
Cost of Credit Cards Debt
See how much your credit cards are really costing you.
Trop dépenser quand ça va bien peut être risqué
Lorsque les heures supplémentaires sont prises pour acquis, le risque d'endettement augmente.