The Top Debt Relief Programs for Canadians

The Canadian government has implemented several debt relief programs targeting household liquidity constraints. These programs allow individuals to push off payments and lower their interest rates. One program makes it possible for homeowners to pause their mortgage payments for up to 6-months and use the freed-up cash flow to pay back bad high-interest debt. Despite potential savings of over $4 billion, these programs have not reached the majority of those who could benefit from them and enrolment has been limited: only 24% for mortgages and 7% for credit cards. Research suggests that close to 80% of eligible homeowners were unaware of these debt relief programs.

Mortgage Payment Deferral

Mortgage payments may be deferred to assist you in the event of economic difficulties, such as unemployment or reduced employment.

Your lender may agree to pause or suspend your mortgage payments for a certain amount of time. This allows you to use the freed-up cash flow to reduce debt on other high-interest credit cards or loans.

To qualify for Mortgage Payment Deferral, you must have a residential mortgage with an eligible lender and meet either of the following criteria :

– Be experiencing financial hardship

– Have been laid off or have had a reduction in income

If you choose to defer your payments, you will be required to make them up at a later date. This may mean extending the term of your mortgage, making larger payments when you are able, or making a lump sum payment at the end of your mortgage term.

Credit Card Interest & Minimum Payment Deferral

If you have a credit card with an eligible issuer, you may be able to cut your interest rates in half and defer the minimum payments on your credit cards.

This debt relief program is designed to help you free up cash flow so that you can focus on other priorities, such as paying for food and housing.

You will need to contact your credit card issuer to see if you are eligible and to find out how to enrol.

Refinance Your Mortgage

If you have equity in your home, you may be able to refinance your mortgage and use the extra cash to pay off debt. This debt relief strategy can be beneficial if you have a high-interest rate on your mortgage.

Debt Consolidation Loan

If you have multiple debts with high-interest rates, you may be able to save money by consolidating them into one debt consolidation loan with a lower interest rate. This will simplify your monthly payments and help you get out of debt faster.

Be sure to check with your debt consolidation provider to find out what documentation you will need to provide.

Home Equity Line of Credit (HELOC)

A Home Equity Line of Credit, also known as a HELOC, allows you to borrow against the equity in your home for debt consolidation. This debt relief strategy may be a good option if you have multiple debts with high-interest rates and limited cash flow.

Extend Your Mortgage (Amortization)

If you have a fixed-rate mortgage, you may be able to extend the amortization period. This will lower your monthly payment and give you more time to pay off your debt.

Before applying for an extension, it is important to consider all of the costs associated with extending your mortgage term, such as interest payments on the debt that will have accumulated over this additional time.

Add Missed Payments To Your Mortgage

If you miss a mortgage payment due to a job loss or reduced income, you may be able to add the missed payments onto your mortgage balance.

This can help ensure that you do not miss any payments and gives you more time to pay off your debt

Move From a Variable to a Fixed-Rate Mortgage

If you have a variable-rate mortgage, you may be able to switch to a fixed-rate mortgage. This will protect you from interest rate increases and give you peace of mind knowing that your monthly payments will not change.

Special Payment Arrangement

There may be a special payment arrangement unique to your particular financial situation. Be sure to speak with a financial advisor to see if you qualify.

Government-Backed Debt Relief

There are a few types of debt relief are backed by the Federal Government in Canada under the Bankruptcy and Insolvency Act, all of which must be handled by a Credit Counsellor or Licensed Insolvency Trustee.

Debt Management Plan (DMP)

A debt management plan is an informal proposal your credit counsellor makes to your creditors on your behalf if you owe more than $5000. It allows you to consolidate your debts into one affordable monthly payment.

Counsellors can offer our non-profit Debt Management Program (DMP) that allows for repayment of unsecured debts at 0% interest (including credit cards, personal lines of credit, payday loans and disconnected utilities) without credit approval. Approval for the DMP is based only on budget affordability.

Before you enroll in a debt management plan, you’ll meet with a credit counsellor.
The credit counsellor will assess your situation, help you make a budget and give you some tips about dealing with your debt.

Consumer Proposal

A consumer proposal is a legal process in which you agree to pay back a portion of your debt over a period of up to five years. Your debts are formally cancelled (technically discharged) at the conclusion of the term, allowing you to begin rebuilding your credit score. A consumer proposal is typically the most secure and cost-effective option when dealing with debt.

Insolvency / Bankruptcy

A federally-regulated process for when you can’t afford to repay even a portion of your debt. Non-exempt assets are reassigned to a Licensed Insolvency Trustee in order to pay off outstanding debts to creditors in exchange for debt forgiveness and creditor protection.

Speak with a Financial Advisor

If you are struggling with debt, it is important to speak with a financial advisor. They can help you understand your unique situation and suggest solutions for your financial goals. This can help you save money on interest payments and get out of debt faster.

Overall, there are many debt relief programs that can help homeowners manage their debt during difficult economic times. Whether through credit card interest rate reductions, mortgage payment deferrals or debt consolidation loans, these programs offer valuable assistance for those who are struggling financially. CMHC will also consider other alternatives proposed by a licensed mortgage professional to resolve or avoid mortgage payment default. In every case, the options available will depend upon your individual financial circumstances.

For more information on Canadians’ top homeowner debt relief programs, visit our website and consider applying for one of these programs today!

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