When you have money problems, it can be hard to know where to turn for financial help. In Manitoba, there are many places that claim to help you with your finances, but some of them only get you into further financial trouble.
If you need financial help, read on to find out some of the best and worst places you can go for money help:
Licensed Insolvency Trustee
When you need financial help, the first place you should think of going is to a Licensed Insolvency Trustee (LIT). An LIT is the best place you can go for financial help.
Licensed Insolvency Trustees are the best trained and most experienced professionals in the field of debt management. In addition, because they are licensed and regulated by the Federal Government, you can be confident in their information and advice. Trustees are audited annually, and even their fees are regulated by the government.
If your debt or spending habits are out of control, an LIT can provide financial counseling and advice. They will review your situation with you and explain all of the various options that are available in your situation. If you get advice early enough, there are often a wide variety of options that do not involve Bankruptcy or a Consumer Proposal. If something like better budgeting, a consolidation loan or refinancing would not work in your situation, then your Trustee will give you information on the two legislative options that are available — Consumer Proposal or Bankruptcy. Both have different advantages, so your Trustee will help you decide which one would be best suited for your personal situation. Both options will eliminate your unsecured debt (with a few exceptions, like child support, alimony, fines and penalties, etc.)
Financial or Credit Counseling
Sometimes, financial problems are the result of poor money management or misuse of credit. In cases like these, learning how to budget your money or better manage your credit may be all the financial help you need. Licensed Insolvency Trustees can provide counseling, and are some of the best sources for credit counselling.
Debt Consolidation
Debt consolidation involves taking out a larger, lower interest loan and using it to pay off your debts. Then, you make one payment to your new lender instead of multiple payments to your creditors. This can be helpful if it saves you money on interest. However, debt consolidation usually requires good credit. If you have money problems, chances are your credit won’t qualify you for a loan from a reputable lender. Other less reputable lenders will charge higher interest rates, and that eliminates any real financial advantage to consolidation.
Credit Counselors
Companies and agencies (often posing as non-profits), offer credit counseling and a variety of options. They will often offer to arrange a settlement with your creditors. While some are legitimately attempting to help unfortunate debtors, there are several serious problems with these agencies.
First, they have no legislative backing, which means that they cannot protect you from further collection practices by your creditors. In fact, they cannot guarantee that the creditors who have received funds from you in a settlement, will not continue to come after you for further payment even after the settlement agreement is complete.
Secondly, there is no regulation or oversight of these agencies, meaning that they are not held to any common standard and their fees are set arbitrarily by themselves. There is also no agency that you can go to if you need to report dishonest or misleading information or administration.
Thirdly, they generally charge a hefty up-front fee. This fee is paid before they have actually done anything for you. In some cases, they will actually charge you an up-front fee to merely refer you to a Licensed Insolvency Trustee, to whom you could have gone directly with no fee charged at all for information and advice.
Fourth, some of these agencies hold out that they can administer and file a Consumer Proposal for you. This is entirely untrue. They can arrange some kind of informal proposal, but it will have none of the protections that a Consumer Proposal has. In Canada, a Consumer Proposal can only be filed through a Licensed Insolvency Trustee. If someone other than a Trustee tells you they can do that, they are not telling the truth.
Banks
Your bank is a great resource when they want to lend you money. However, when it comes to helping you solve financial problems, you need to keep in mind that the banker you are talking to, works for the bank, not you. This means that they have the best interests of the bank as their first priority, not your best interests. In some situations, where your debt problem is not severe, your bank may be able to help with a consolidation loan or a second mortgage. However, they cannot tell you if either of those options are in YOUR best interest. You need to know that before you talk to them.
Payday Loans
Payday loans should be avoided at all costs. Payday loans are very high in interest and fees. They make their money on the assumption that you will be unable to pay the loan back by the due date, then charge high interest and fees to renew it. Payday loans can become a vicious cycle of ever-increasing interest costs and fees.
There are plenty of options for financial help in Manitoba. However, some can cause you more harm than help. Before you agree to accept financial help from anyone, make sure you research companies and lenders thoroughly and read the fine print before coming to any agreements.
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Leigh C. Taylor, LIT
