Is solving your debt problems with the help of your loved ones a good idea?
By Marc Nantel-Legault
When you are facing money issues, it can be an incredibly worrying and anxious time. However, being able to raise these issues and talk openly about those problems with your family and friends can alleviate that pressure.
Despite the taboo surrounding these topics, experiencing debt problems is actually very common. According to a Government of Canada webpage, nearly a third of Canadians believe they have too much debt. Facing debt problems often leads to people becoming withdrawn and isolated, appearing moody or distant from those you love most.
If you are finding your debt issues are coming between you and your family and friends or if you’re considering their financial support, here are five things to consider:
1. Should you discuss your debt problems with people close to you?
Everyone can experience money issues at times, but if you are finding bills and debts are beginning to build up, then it is important to remember that you are not alone. When issues start to occur, do not shy away from talking about them with your family or trusted friends.
Although it can be daunting, acting quickly will help prevent these feelings from overwhelming you. You will also find that sharing your issues can help to alleviate the stress and set you on a path to a solution.
2. Is it normal to be afraid of their reactions?
One of the biggest issues people have when opening up about their debt problems is the worry of how their loved ones will react. However, debt can affect everyone, and you will be surprised at how supportive your family and friends will be, and will be eager to help you create a clear plan to get yourself back on your feet.
3. Should you borrow money from friends and family without having a plan?
It is best to think twice before considering borrowing money from your friends and family or asking them to be a guarantor or co-signer on a consolidation loan.
We strongly suggest preparing a long term budget and identifying the cause of your debts before borrowing any money from people close to you. While their help might patch the immediate financial problems and help you respect your minimum payments and meet your immediate obligations, it could leave you in just as much of a difficult position if your financial situation deteriorates thereafter.
If you have to file for bankruptcy or file a consumer proposal later on, you will have to include all your debts including the ones to friends and family. They may suffer a loss as a result.
4. What to do with a co-financed or co-leased vehicle obligation?
When filing for bankruptcy or filing a consumer proposal, it is possible to retain your financed or leased vehicle if your payments are up to date and that you continue to respect the financial obligations after the filing.
There will be two benefits from keeping the vehicle :
i) It will be a positive factor on your credit file and will help you rebuild your credit score ;
ii) Your friend or family member who had co-signed won’t be stuck with the financial obligation or the negative impact to their credit file.
In certain cases it is possible to do a lease transfer or sell the vehicle with a minimum loss. If you have a co-borrower on your vehicle financing or other type of financing, make sure to inform us as it may impact our recommendations.
5. Can family or friend’s help be used to quickly complete a consumer proposal?
If you are facing financial difficulties and have family members or friends willing to help you out, with a personal loan or gift, this could let you regain control of your financial future much more quickly.
The first step is to meet a professional to understand your various debt relief options. After having looked at your budget, we may conclude the consumer proposal is the best option for you. Lets say you had $30,000 in debts and that we can successfully negotiate a consumer proposal with your creditors for $8,000. If you have family or friends that can lend you the $8,000, your consumer proposal could be completed in less than three months and you could rebuild your credit much more quickly while repaying the friendly loan over a reasonable period of time.
As every situation is unique, please consult us if you would like to understand how this example may apply in your case.
Need help with your finances?
Working with us will help you to see your financial situation more clearly, providing you with a better perspective. We will also be able to use our expertise to provide guidance throughout the process, becoming the main point of contact for all creditors, helping to take that pressure away from you. , so get in touch and book your appointment today.
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