Posted on Tuesday 14 July 2020
Getting a free grant from the Canadian government sounds like a dream in any scenario—especially when you are up to your elbows in debt. There’s no sense in sugarcoating it: being in debt can be incredibly frustrating and demoralizing. If you’ve struggled with a high amount of debt for an extended period of time, you know exactly how stressful it can be to wonder how you will pay your bills each month, or if you will ever be able to get out of debt for good.
So what about Canadian government grants? Are there any programs where the government can help pay off debt? Well, here’s the thing: although you might have seen some financial institutions advertising otherwise, the Canadian government does not offer grants to help consumers pay off their debts.
If you see a company advertising “Canadian government loans and grants to get out of debt,” that doesn’t mean those loans are coming directly from the government. It likely means they are operating under government-approved standards and regulations, which they should be doing anyways. They are using the same underwriting rules that you would find in a regular loan. It could also mean that they offer a government-sponsored program called a consumer proposal (stay tuned, we’ll cover that below).
Although free Canadian government grants to pay off debt may be just as mythical as a unicorn, that doesn’t mean that you can’t get out of debt. See the sections below for a handful of real programs and resources that you can take advantage of today to start chipping away at your debt and move toward financial freedom.
Consolidating your debt should be a go-to option for all Canadian consumers, especially if your biggest source of debt comes from credit cards. Not only can debt consolidation help you stay organized by combining all of your debts into one monthly payment, but it can also help lower the amount you pay over time.
Interest rates from debts are pricey (particularly when it comes to credit cards, with some as high as 29.9%). Sky-high rates can cause you to pay much more than what you owe over the life of a debt, making it harder to pay off what you owe. Combine high interest rates with making only the minimum payments, and you’ve got a recipe for debt that lasts much longer (and costs much more) than it ever should.
Consolidating your debt gives you the opportunity to get a new interest rate—and because you’ll have multiple debts covered under one interest rate, this could make a significant difference in your overall ability to pay what you owe and get out of debt sooner.
If you have student loans, you can ask your loan provider about consolidation programs. If you have a mix of credit cards, personal loans, and other assorted bills, you can take out a debt consolidation loan. A few places to look for a debt consolidation loan include:
If you have very high debt and don’t have enough income to cover it, you could try and settle your debts. Settling means that you agree to pay them off at a lower amount than what you actually owe. There are two ways of doing this: first, you could try to reach out to each account on your own and negotiate a settlement. Second, you could partner with a credit counsellor and have them contact your creditors to negotiate for you.
Sounds like a great deal, right? Debt settlement is a smart move to managing your personal finances and getting out of debt—but be careful and use this approach only when you really need to.
Once a debt is settled, it gets recorded on your credit score, which means future lenders will see that you have had past debt settlements. If you’re in the market to finance a large purchase down the line (like a house or a car), a lender might not be as eager to approve you if there are multiple settlements on your credit score.
A credit counsellor is a great resource to get tips and strategies on how to pay off debt. They’ll pull your credit score, examine your finances, and sit down with you to discuss your financial situation and strategies that fit your unique needs. You can learn how to budget and create a plan to get out of debt—all while instilling good financial habits that help you stay out of debt for good. Such as buying food in bulk, etc.
Of course, this isn’t the route that provides the most immediate results. Seeing a credit counsellor doesn’t mean that you’re going to see results overnight—in fact, it’s likely going to be a slow process of incrementally making changes under the guidance of your counsellor. They can even offer help on your CPP and others.
But credit counsellors bring valuable insight, experience, and strategies to the table. Most importantly, those strategies are built to help people understand how to keep their good financial health, meaning you can get guidance that will last a lifetime. No matter how much you owe, if you’re feeling stuck in your debt and aren’t sure where to start, a credit counsellor or a debt management specialist is a fantastic step in the process.
A consumer proposal is a legally binding debt settlement agreement. With the help of an insolvency trustee, you and your creditors will come to an agreement on how much of your debts you can pay—and often at a fraction of the cost.
Consumer proposals can be used for nearly any kind of debt, such as credit cards, personal loans, tax debts, and even student loans. However, if you need to make payments on a mortgage or a car loan, you’ll have to look elsewhere: you can’t pay on these debts with a consumer proposal.
So what’s the difference between settling your debts on your own and a consumer proposal? It’s all about the legality. Going the consumer proposal route is a formal, legally binding process. It means that both you and your creditors agree to a certain set of terms, and both sides are legally obligated to follow through on those terms. It also means that you have to meet a set of requirements in order to be eligible for a consumer proposal. These include:
A consumer proposal is a good option if you are in danger of wage garnishments or other legal action, have debt that is significantly higher than what you can afford to pay off, and want to avoid bankruptcy. Just keep in mind that a consumer proposal means entering into a legally binding contract with your creditors—so make sure that you talk to your insolvency trustee and fully understand the terms and conditions.
This is the most extreme option to pay off debt, and should only be used as a last resort. Filing for bankruptcy means that you are asking a judge to review all of your assets against all of the debts that you owe.
First, you’ll meet with a bankruptcy trustee and consolidate all of your financial data. Then, the judge will decide whether you have enough in assets to apply to your debt. If they decide that your debt outweighs your assets, your debt could be wiped clean.
However, you may need to apply some of your assets to your debts before you get a clean slate. This will depend solely on your unique financial situation, as the bankruptcy process is drastically different from one person to the next. Speaking with a bankruptcy trustee is the best way to understand what you may be liable for.
Ultimately, bankruptcy meant to help those who truly need it—although there are a few financial caveats that you should be aware of. Bankruptcy will stay on your credit report for a minimum of six years, which will impact your ability to borrow or open new accounts. And during the bankruptcy process, your credit will be frozen, meaning you will need to live without credit cards until the bankruptcy proceedings are complete.
Let’s face it: being in debt is tough, and choosing your next steps can feel overwhelming. But when it comes to paying off debt and working toward better financial health, any action is better than inaction. If you don’t know where to start, reach out to a financial professional to get guidance—they are a fantastic resource and can be your first step to living debt-free!
If you want to start small by paying off credit card debt, household bills, or just need a little bit of extra cash while you pay off your debt, a short-term loan from My Canada Payday can help. Learn more about why My Canada Payday is one of the best payday lenders across the country by calling (604-630-4783) or emailing (email@example.com) our industry-leading support team!