There are few things in life that can match the overwhelming stress of having mountains of debt. Whether taken out for school, business ventures or credit card expenses, it’s often hard to avoid incurring expenses that gradually turn into an albatross hanging off your neck.
As the amount of money you owe grows larger and larger, so does the interest rate and eventually, it can get to the point where you’re on a path to personal bankruptcy, a devastating declaration that can destroy your credit score and leave you much worse off.
However, for that one-in-twenty Canadians who are deep in credit card debt, one possible alternative can be the use of debt consolidation services. With the right service provider, you can be on your way to melting down your money owed and finally freeing yourself of the chains that bind you.
The Choices You Have
There are two primary ways that you can expect your debt to be consolidated and dealt with.
The first is called a consumer proposal. Like traditional consolidation, it allows for manageable monthly payments to be made to pay off the entire debt, usually ending up paying only some of the debt accrued.
As someone in debt, you can avoid filing for bankruptcy by offering your creditors a partial or entire pay off of your total debts over a period of up to five years. Naturally, this is appealing to both sides. For you, there’s no need to declare personal bankruptcy, while your lenders get a chance to get back some of the money that is owed, making it a win-win for everyone.
It’s also customizable to match a manageable monthly payment plan that takes into account your budget while optimizing itself to also settle the most debt possible. Another advantage is that once a consumer proposal is filed, interest rates on the debt immediately halt, and you will receive other protections from fees that eat out of your wages or bank account, as well as from asset reclamation and any other type of debt collector action.
The second option is to put forth a bankruptcy assignment. This is a final resort and should only be used if it’s entirely possible to meet debt obligations. This assignment to bankruptcy will take off a load of most of your debt, while also stopping collection efforts and court actions. This is basically the same as going bankrupt and will require your assets to be taken away and distributed as proceeds to the lenders.
Naturally, if possible, you should use debt consolidation (also known as filing a consumer proposal) where possible as it allows for reasonable payment schedules that settle the debt without accrued interest while avoiding bankruptcy. It can be very useful to get a financial services provider to walk through the specifics of how a debt consolidation plan might look for you.
The Mental Toll
While debt is bad because you don’t want to owe money, the mental toll it carries with it cannot be overstated. That’s why one of the main reasons for you to use debt consolidation is to deal with and reduce debt-related stress. But how exactly does that mental health cost appear?
One thing to note is that secured debt is typically much less stressful. For instance, a mortgage where you have to get qualified and assessed is usually much more comfortable to deal with and can in fact, boost your mental health.
No, the real stress comes from unsecured debt taken through credit cards or lines of credit. The debt by itself isn’t the biggest problem. Instead, the mental stress comes from the inability to deal with the debt in a meaningful way.
$10,000 for one person might be a small amount they can pay off rapidly, while for another, it could be a life-changing debt that they don’t have the budget to deal with. Stress directly correlates with your ability to pay off debt or, in financial terms, your debt to income ratio. The higher your debt is in comparison to your income, the worse off you’ll be stress-wise.
Another catch-22 is the inverse cycle of mental health and more debt. Either because of pre-existing conditions or random circumstances, you’ve taken on too much debt. As a result, you start to deal with your problems differently.
For instance, you don’t open your bills or address them, you self-isolate and miss work, or you use the money to relieve stress by buying junk food or alcohol. All of these actions will just serve to exacerbate your problems, increasing debt and stressing you out more, creating a vicious cycle of increased debt to increased mental health problems and so on.
What to Do About the Stress
Aside from using debt consolidation services, there are other steps you can take to deal with the stress of unsecured debt.
One important thing to remember is that you’re not alone. In 2018, nearly 40,000 people in Ontario alone had to declare themselves insolvent. Everyone faces financial problems and knowing that can help with the isolation and guilt.
Also, be sure to take things slowly. There is no quick fix, just like how you didn’t get into this situation overnight. There’s no expectation to fix money problems all at once, and it can be helpful for your health to start slow, taking on a few bills at a time.
Lastly, talk to the loved ones in your life. Open up to the people you trust about your feelings and your debt. Getting support from others is a hallmark of a functioning human and you shouldn’t forget to get all the help you can.
The pain of having a large debt can at times feel like too much to bear. But there are people out there who care, and there are people out there who can help. Reach out. Take advantage of the services available to you. Go slow and steady if you have to, but just don’t stop. You can take your life back from debt and we can help.