This Is What Happens to Credit Card Debt in Canada

This Is What Happens to Credit Card Debt in Canada

Having a large amount of credit card debt can be stressful. If an individual owes money on a credit card in Canada, creditors will find ways to quickly recoup their losses. With that said, a person must do everything they can to avoid debt collectors and get out of debt.

Read on to discover what happens with missed credit card payments (and what the next steps could be). 

Failure to Make Credit Card Payments in Canada

While the exact sequence of events may vary depending on the credit card provider, here is a general overview: 

• Failing to Make Payments for A Month

With due notice a month late on a credit card payment, the penalty varies depending on the creditor and the terms of the credit card agreement. Certain creditors may contact the card holder by email, letter, or phone to remind the person of payment. 

• Failing to Make Payments for Several Months

Missing a single payment isn’t a big deal if it’s made up the next month, but missing multiple payments can be a problem. After a few missed payments, however, the creditor will send the person multiple notices requesting that they rectify the situation. If the creditor believes they will not be repaid, legal matters may take place. 

• Failing to Make Payments for Five Years

Failing to make credit card payments for several years could force the credit card company to take more drastic measures. 

An individual will receive notices until the debt is resolved, regardless of whether the creditor assigns the debt to a third party or handles it internally. Furthermore, a bad credit report can have a damaging impact on long-term financial goals. 

Managing Credit Card Debt

There are several options available to help people repay their credit card debt and avoid the complications that come with late payments. Consider the following:

• Get in Touch with Creditors 

The simplest solution is to contact the creditor and explain the situation. They may not be sympathetic, but they may suggest a less expensive repayment option.

• Apply for a Debt Consolidation Loan 

With good credit, the bank may provide favourable loan terms that may assist in paying off debt faster and save money on interest. 

Using a loan to pay off credit card debt is risky. To avoid future debt problems, avoid using credit until the debt consolidation loan is completely paid off. 

• Request a Personal Loan 

Another option is to make the payment with a personal line of credit. A personal line of credit, unlike a debt consolidation loan, does not charge interest until the funds are used. 

Because personal lines of credit accrue interest only after they are used, some people have lines of credit that they rarely (if ever) use. Although, the temptation to use it is strong. Thus, fiscal restraint must be exercised.

• Take On a Debt Consolidation Program (DCP) 

One of the main advantages of a DCP is the ease of making a single low monthly payment. This allows people to stay on top of their debt repayments as quickly as four years. 

While on a DCP, the individual must give up their credit cards. For some, this may be advantageous because it eliminates the temptation to use credit to pay off debt.

Conclusion

Now with all this knowledge, any individual can be saved from future credit card troubles. Whether inside or outside Canada, being financially responsible is a way to achieve the desired quality of life. With the right guidance and help, goals can even be achieved!

Credit card debt out of control? Debt Helpers provides customized debt solutions for all Canadians. Need help easing out financial problems? Contact DebtHelpers.ca today!