Record Debts Being Written Off

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The financial crisis in which we have been living for some time now has changed the realities which we had accepted for some time, and many of those realities have changed for the worse. But for borrowers on credit cards who had been panicking about the pursuit from the issuers, there is one statistic which has improved. The issuers of credit cards are charging off a record amount of debt – meaning that they have accepted that people are not able to make their payments, and chasing them for those payments will not change the reality that they simply cannot afford to pay. It should be noted that this is not the case for every customer – if you can afford to pay but don’t want to, then the status quo will remain.

The simple truth of the matter is that with the unemployment rates having increased due to the global financial crisis, there are more and more people who simply cannot meet their credit card payments. Traditionally, this has led to  a troublesome situation where the banks pursue people to make any kind of payment at all, promising in many cases that if you can make “just a small payment” your account will be held for a while and that pursuit will be ended. For many customers, this pleasant notion has been miles away from the reality, which has been that a small payment alerts the company to the fact that you are responding to pressure, and the pressure just gets ramped up that little bit more.

When a company finally accepts that there is nothing they can take from you, they charge the debt off. What this means in practice is that they lay off collections activity and write the amount off, taking a hit on their profits which needs to be covered by the amount of money each bank sets aside for such reasons. It does mean that annual bonuses for the bank workers will be a little bit lower, but you will find fewer and fewer people complaining about that eventuality. As much as the everyday workers at a bank are relatively blameless for the profligacy of the bank’s lending policy, we are all having to cut out coats according to our cloth these days.

The fact remains that people who knowingly borrow and spend recklessly will have to be pursued to make their payments. Now is not a good time to take out a credit card and run up a mountain of debt which you have no intention of meeting. Quite apart from anything else, banks are still hugely reluctant to lend large amounts of money unless they are sure, on the basis of their own research, that they will see a good return on that investment. If you have a good credit rating, they may well still lend to you – but would you want to risk a good rating now of all times? If, however, you are looking for a fresh start, now could be the best time to get that start.

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Loan Approvals Have Risen To Their Highest

Canadians looking to purchase a new car in the second half of 2009 should find it easier than they did a few months ago, according to a new report which gives broadly positive news on the likely availability of car loans for new customers. The report, released this Thursday, 25 June 2009 says that loan approvals have risen to their highest level in more than a year, and since the recession was declared. At the time of the recession’s onset, getting credit for any purpose became a great deal more difficult, with affordable loans comparable to the Golden Fleece for anyone not in possession of a world-beating credit score. With financiers more willing to lend now than they were a year ago, the motorist is getting a green light to secure funding for the vehicle they want.

The main reason for this ease would seem to be the federal government’s move to secure the finance of $12billion worth of car loans which will allow the financing companies to lend to deserving customers who have a decent credit rating. In any recession there will be a reluctance to lend to anyone but the absolute “can’t miss” customers, who often have little need for a loan in order to buy a car and borrow more for convenience than out of necessity. This latest move will open up the chance to buy a new car to a wider range of individuals and allow a greater fluidity of cash through the industry, which will in turn help stimulate an economy in need of some good news as it battles its way through the recession.

The withdrawal of some major lenders from the auto-loan business over the past year is also believed to have played a major part in the absence of credit – with the Bank of Canada being a notable exception. The car companies themselves, though, had in no small part either removed their lending branches or increased the credit score necessary for them to forward credit to new customers. Although there is good reason for being circumspect in giving out new car loans, it did have the effect of creating a vicious cycle which saw fewer customers able to buy cars, and consequently fewer cars being bought.

The overall impression emerging from the latest news is that the credit-worthiness and the intent to buy new is experiencing a rise in Canada and that there will be increased growth in the Canadian auto market as the year progresses. Household credit ratings are improving as the lessons of the recession are learned, and in combination with an increase in the amount of retail and durable goods purchases over recent months, the least that can be said is that the worst of the recession is over. How quickly this translates into growth of a reasonable amount remains to be seen, but it is a relief for any financial commentator to be able to say that better days are very nearly here. How much better depends on how ready people are to believe it.

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A is For Amortization

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Taking out a mortgage is something that most of us do, sooner or later. There is a lot of fear and uncertainty attached to the idea of taking out a mortgage, not least because the term of a loan taken out to buy a house will generally be longer than if it were taken to buy something a bit smaller. Typically, the term for a mortgage will be in the region of 25 years – a very long time by anyone’s estimation, and a time in which so many things can change. Think about it – the average length of time an individual spends in a job these days has fallen to about three years. Although the average does not apply to everyone, and takes into account that people will spend a very short time in some jobs, it still offers the possibility that you will change jobs more than a couple of times during the term of your loan.

In addition, mortgages are considered to be a little bit nerve-wracking by some because of the jargon which is so often used by those who are selling a mortgage or by the financial experts discussing what the future holds for mortgage owners on the daily news – something of a motif of the age, it has to be said. Maybe most people just about understand what a mortgage is but beyond that, all bets are off. Take the average person (someone without a mortgage, as a preference) and ask them what a “principal” is. Someone who works in a school, or an actor in a lead role? That’s likely to be the response. Even if you mention that you’re talking about money, you’re still more likely to get a confused frown than an accurate reply.

When things get even more complicated, therefore, the average consumer is likely to become still more confused. Ask the average individual, mortgage holder or not, to tell you what “amortization” is, and the eyes will begin to glaze over before you have even mentally added the question mark. This is a pretty important part of a mortgage account, and there are still several people who will be unable to tell you what it is. The reason? No-one has thought to tell them. It could be argued that this kind of thing should be taught in schools, because money smart kids will be less likely to get wrapped up in debt later on.

Amortization is defined as “the allocation of a lump sum amount to different time periods”, and an amortization schedule forms part of any mortgage agreement you may have or take out in future. On a typical amortization schedule, the amount you pay each month towards your mortgage account will be detailed both in terms of how much will go to paying down your principal and how much will pay off the interest on your loan. As time goes on, assuming your loan has positive amortization, you will find that more of your payments are going towards paying off the balance of the loan. The kind of amortization you have will be influential in how efficiently you can pay off your mortgage, so ask any mortgage advisor to take you through your options.

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Canada Mortgage

Canada has not been immune to the credit crisis that has hit the world over the last eighteen months, but there are many inside Canada and out who feel that of all the major developed nations things have been handled better in Canada than anywhere else. This is down, in no small part, to a sense that Canadian banks have had more sensible lending policies and that panic is something that is not a major part of the Canadian psyche. A recent IMF report has said that Canada is actually specifically well placed to handle any further economic crisis and has applauded the $400billion stimulus plan unveiled in January as being the right amount at the right time. In addition, Canada has been recognized as the last country to succumb to the crisis and is expected to be the first to lift itself out.

What this means for those hoping to buy a house in Canada is that there may never be a better time, if you currently have the borrowing power, to buy one. By taking advantage of the effects of the crisis – admittedly something that causes a moral issue for many – one can find some bargains that will begin to increase in price once the clouds start to lift. The question is, where should you go in order to borrow the money it will take to buy? With Canada less marked than other countries by the crisis – but marked nonetheless, no doubt – the banks are more willing to lend to those who can show credit worthiness than banks in other countries.

Before you decide on a mortgage, the first and most important step is to shore up your own position. This can be done chiefly in two ways. Firstly, it is vitally important to save cash for a deposit, or down payment. If you can place this in a high-yield savings account, so much the better. By putting aside more money, you will cut into how much money you have to borrow when the day comes. This can dramatically change how much you have to pay back, and bring a number of properties within your reach that would have been fantasy purchases otherwise. It will take a bit of time to make significant savings, but the base that this gives you and the difference that it makes will be well worth the wait.

In addition, you should live on credit for a while. Yes, you read that correctly, but do not make the mistake of thinking that this is advice to go crazy with your Mastercard. The reason for this possibly controversial advice is actually fairly sensible. If you make purchases on your credit card and pay them off immediately, you build up a strong credit rating. And the people with the better credit ratings get better mortgages. By  paying off credit card purchases the moment they hit your balance, you will avoid having to pay interest, so there is no penalty for use. It’s a more roundabout way of doing things, sure – but it’ll get you into that house quicker! Try to make sure, too, that you do not have high balances on any lines of credit when you apply for your mortgage – this will badly squeeze your borrowing power.

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Filing Bankruptcy In Canada

Sometimes, no matter how much one wants to prevent it, personal finances can spiral out of control. You can find yourself struggling to make debt repayments, worrying constantly about the future and what it may bring. If you ever reach the stage where you freeze in terror every time the phone rings or the doorbell goes, it may be time to face the state of your finances.

When it comes to personal debt, the word bankruptcy is particularly terrifying. To many, it signals the end of life as they know it, and as well as the financial implications there is something of a social stigma attached to it. Yet sometimes, if debts are substantial and you aren’t earning enough money to cover your outgoings, it is the only reasonable option to free yourself from the never ending cycle of debt. Bankruptcy is the last resort and should only be entered in to with the knowledge that all else has failed, but it’s part in helping resolve finance issues is irreplaceable.

In 2007, more than 100,000 Canadian nationals filed for bankruptcy, so you are not alone. If you have decided bankruptcy is the only option left available to you, you begin the process by filing for bankruptcy via a trustee for bankruptcy. To find one, check your provincial advice pages or even just check the Yellow Pages.

When you file for bankruptcy, an automatic stay is granted to you. This means that, during the bankruptcy process, your creditors cannot make moves to seize assets and should stop making collections calls.

For a first time bankrupt, the term of the bankruptcy is nine months. This increases if you have to go bankrupt more than once. At the end of the nine months, the bankruptcy is discharged. During those nine months, you are required to make payments to your creditors and to the trustee you petitioned for bankruptcy with. Depending on the size of debt, these payments vary, with a national standard of $200 per month for the nine months. You will also need to pay around $85 for financial counselling as a condition of discharge. At the end of the nine-month period, the bankruptcy is discharged and in all but a few rare cases the debts are erased.

Bankruptcy does not automatically mean you will lose all your asset s, as in most cases there are certain limits that you can own. For example, In Ontario, you can keep up to $5,650 equity in a vehicle, $11,300 worth of household goods, and up to a value of $11,300.00 worth tools you use to earn your living . Your trustee, who will advise the best course of action, which may involve selling items, makes the decision on any amounts over these for each particular area.

When discharged, the bankruptcy will remain on your credit file for up to six years. During this period, it may be difficult – though not impossible – to get credit. However, this should not be too much of a deterrent; as if you are in a situation where bankruptcy is the only option; your credit file is going to be damaged hugely anyway. At least with bankruptcy you gain a clean slate in six years, something that would be hard to do struggling to make repayments on any large debts.

Overall, if you have reached the end of the line and creditors are hassling you non-stop, bankruptcy may be the most efficient and effective method of getting out of trouble. If you are having difficulty paying your debts and/or considering bankruptcy, I suggest you contact a Canadian Bankruptcy Trustee licensed by the federal government to discuss your situation. To find a trustee in your area, search on Google or Yahoo using these keywords: Bankruptcy, Trustees, Your Area.

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 Personal Finance For Students

Third-level education is becoming more and more important in terms of getting a job in many sections of the economy. Some employers are unwilling to consider applications from candidates without a college diploma, and some of those employers will only to consider applicants with diplomas from certain schools. The problem for the prospective scholar is that college education doesn’t come cheap, with tuition, course materials, travel and accommodation costs often being prohibitive for the many students who cannot attend a college close to home.

Fortunately, for the needy prospective student, the Canadian government does have a program where they fund Student Loans for eligible scholars. Eligibility is decided on a number of factors including location (both of the pupil and the learning institution), current living costs, savings and parental income. For students who fall into the bracket of eligibility, a government-backed student loan is a godsend, allowing them to concentrate on their studies free of at least part of the worry of funding their education.

A student loan, as the name suggests, does have to be paid back when the student has graduated and is earning a salary, so it’s not free money and its use has to be priority-based. These priorities are in part, much the same as those that require the attention of a home owner – keeping a roof over one’s head, putting food on the table and paying bills. Even in subsidised student accommodation, these priorities are non-negotiable and in large this helps a student prepare for life after college.

Being responsible for your own budget teaches you to look after the pennies, which becomes all the more important when there is a mortgage to keep on top of and failure to pay that may result in your home being repossessed. Having to set aside cash for tuition fees keeps the importance of your studies at the forefront of your mind, reminding you why you’ve taken this step. When there are parties to attend most nights and a level of freedom beyond what you’ve known in the parental nest, it’s easy to feel that student life is all about the social side of things. But without responsible financial behaviour you could end up having to drop out and, without doubt, the restrictions of living back at home are felt all the more when you’ve lived without your parents for a spell.

If you don’t qualify for a government-backed student loan, there are still options available. Private student loans are one such option. Although they are not quite as secure an option as a government loan – being based on credit and therefore often necessitating that a parent acts as a co-signee- they are given by lenders at a low rate of interest and tend to be generous enough to cover the important costs of student life. Then, depending on the intensity of your course, it is possible to take on a part time job – which will often provide adequate money for as many toga parties as you want to attend.

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