Like many Canadians, Hall wasn't formally taught in high school about monthly budgeting and her family never showed her how to budget, so she got in over her head. Whether it's from Christmas gifts you can't afford or that new car that you just couldn't resist - or afford - household debt levels in Canada continue to rise to record levels.
What she also didn't know was that there were several options available to her, and not just the obvious debt consolidation loan options, which is one way to deal with the situation.
Hall went to Credit Counselling Services of Alberta, now known as Money Mentors - a non-profit organization dedicated to finding creative solutions for anybody to get their debts under control.
She enrolled in the Orderly Payment of Debts program, a provincially regulated and legislated program that, similar to a debt consolidation loan, brings all of your debts into a single monthly payment until they are paid off over a set term at five per cent interest - much lower than the 18 per cent or 20 per cent most credit cards charge.
She had to give up her credit cards and her credit rating would take a big hit while in the program - it stays at R7, one step above bankruptcy, for the term of the OPD program - but she came out the other side free of debt.
"As soon as I was in the (OPD) program, the creditors went away," Hall says.
It took her two years to pay off her debt. Then she had to start rebuilding her credit rating, starting with a $500 secured credit card with some savings she had accumulated in anticipation of her final payment.
Since then, she has not only re-established a good credit rating, but she also started her own marketing business three years ago in Calgary, Raise Marketing Inc., which has grown into a $500,000-a-year business.
Tracy Wilson, a former credit counsellor who is now a spokeswoman for Money Mentors in Calgary, says people often get so fearful of their debts that they just avoid them. Bad move, she says.
"After Christmas, when the credit card bills start rolling in (and) you're too far over-extended, dreading the statements coming out . . . can also cause problems sleeping and higher levels of stress," Wilson says. "You can't just think it's going to go away on its own."
One of the first steps in dealing with your debt should always be trying to negotiate repayment terms with your creditor that you can handle. Depending on your situation, that option may not work, so she advises people to seek out professional advice through a financial adviser or through a credit-counselling organization like Money Mentors.
That starts you on the road to exploring every available option - before facing the prospect of bankruptcy.
Aside from OPD, people with debt may consider selling a personal asset, such as a car, to deal with it.
"Maybe you take the bus," says Wilson. Just make sure you haven't listed your asset as collateral somewhere else or that you still have car payments left on your asset.
Don't forget about asking for a personal loan from a family member, too. It may be a difficult conversation to have, but effective.
"But get it in writing," she says.
Debt management programs, also called debt consolidation loans, are another way to bring all of your debt into one, single payment. The difference between these loans and the OPD program is that consolidation loans aren't regulated and creditors must agree to the terms. You will, however, retain the ability to keep your credit cards and won't suffer the same kind of temporary hit to your credit rating - if you keep making regular payments - but Wilson advises to get rid of the credit cards. Certainly don't use them.
Hall's best advice is to face the debt. "Communicate with your spouse and communicate with your creditors," she says.
"They're going to be a lot more willing to work with you if you can just communicate with them."
Take one of the free seminars on budgeting and see a counsellor.
"I'd rather be out of debt than embarrassed and in debt," Hall says.
Dealing with holiday debt
- - Develop a spending plan. Identify exactly how much money you owe, how much you earn, create a detailed budget and determine how much extra money you have each month to pay down those high-interest debts, such as credit cards.
- - Consider any personal assets you have that you could sell to earn some extra cash - even your car could be one source of money, if you can afford to ride the bus instead.
- - Seek professional advice, such as through a credit-counselling agency, which is usually free and offers an objective opinion about your unique debt situation.
- - Negotiate with creditors. Often, if you communicate with creditors they may work with you to create a reasonable payment schedule based on your situation, or perhaps even lower your interest rate.
- - Debt management programs are another option. Also known as consolidation loans, both private lenders and non-profit organizations offer these on varying terms. They bring all of your debt into a single payment and you can still maintain credit - just don't use it until you've paid off your existing debt! Be wary of some high-risk lenders who end up charging you more interest than you already pay.
- - Orderly Payment of Debts (OPD) program: In Alberta, this is a provincially-regulated and legislated debt repayment program backed by the government that works similar to a consolidation loan, but with differing terms and conditions. Creditors must abide by the terms set out for full repayment - capped at five per cent interest - and will not be able to contact you while you repay.
- - Personal loans: Consider asking a family member or a friend for a loan to pay off the largest, highest-interest debt. Make sure to put it in writing, including any interest, and treat it like a loan to the bank.
- - Restructure your mortgage. By taking advantage of low interest rates, you may be able to free up extra cash each month by reducing mortgage payments, but this depends on getting qualified and how much debt you owe.
- Derek Sankey, for the Calgary Herald
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Source: http://www.calgaryherald.com/business/r ... story.html
