For many of our Consumer Proposal and Bankruptcy clients, learning to use credit wisely is one of the most important aspects of our Credit Counselling Services.
Whether you are starting out – or getting a fresh start, knowing the smart way to use credit will enable you to move confidently into your future.
If you already have credit debt – make sure you take control of your debt load as soon as possible.
If you are unable to repay your existing debt, and are looking for a fresh start in your financial life – contact the Professionals at David Sklar & Associates, Bankruptcy and Consumer Proposal Trustees. With six offices in the Greater Toronto Area – we are here to help you. Call us at 416-498-9200 to book your Free Consultation.
Credit is a loan of money between a lender and a borrower – where the borrower agrees to pay back the loan plus interest according to specified terms.
There are two main types of credit – secured and unsecured.
Secured credit is offered on houses (mortgages) and on big ticket items such as vehicles. With a secured loan, the borrower does not have ‘clear title’ (total ownership) of the purchased property until the loan is paid in full. If a borrower is unable to make the required payments in the required manner, the lender has the right to sell the property used to secure the loan, to recover the amount still owing on the loan.
Unsecured credit is loans where no property has been secured for the loan. The most common type of unsecured credit is credit cards.
Before you begin looking for a home – find out how much of a mortgage you can qualify for:
Canada Mortgage and Housing Corporation (CMHC) has an excellent, easy to follow home buying guide that we highly recommend you complete – Home buying Step by Step
When you take out your mortgage – you will hear a lot of talk from your lender about the power of extra payments – listen very carefully, this will probably be the best advice you will ever get from a lender. This is where not mortgaging yourself to the limit will enable you to significantly reduce the cost of borrowing on your home, and reduce the number of years it will take you to pay off your mortgage.
Many people have accepted the idea that they will never be mortgage-free – but that does not have to be the case. Careful planning and budgeting can help you to become a mortgage-free home owner.
Next to your home, your cars/trucks/SUVs/vans are most likely the biggest purchases you will make.
Before you begin looking for a vehicle – use your budget to work out how much you can afford in monthly payments and monthly vehicle operating costs. Be sure to include such costs as:
Shop for the best loan you can get – starting with the major banks and credit unions. That way, when you walk onto the car lot you will know exactly what you can afford. If the car lot is able to make a better loan offer than you have found – great, but whatever the situation, you are in control because you have done your homework.
We also recommend that you do your homework in terms of car values – checking classified and car lot ads in newspapers and online. The Ontario Ministry of Transportation has put out a good guide for buying/selling vehicles in Ontario that you should be familiar with.
And of course, always, always have any vehicle you are considering buying checked out by an independent mechanic you trust
Selecting a Credit Card
As in the case of any loan – before selecting a credit card it is essential to shop around.
When you are researching bank credit cards you will find there are a number of different card types. Selecting the type of card best suited to your needs will take some evaluation on your part. For example, is it worthwhile for you to pay an annual fee to have a card that has reward points? For most consumers, a bank credit card without an annual fee and no rewards is a wise decision.
Here are some of the things you need to know before selecting a bank credit card:
Be wary of introductory interest rates. Be fully aware of what the interest rate and fees will increase to after the introductory period, and what any balance you carry over from the introductory period will be charged at.
If you do not qualify for a regular bank credit card, you might be able to get a secured bank credit card. This type of card will require that you set up a special bank account which will be used to pay off the secured card. This type of card enables new consumers and consumers will poor credit ratings, to establish and build a credit history and improve their credit rating.
Note: Department store or retail credit cards tend to charge more interest than bank credit cards and are limited in where they can be used. While retail credit cards do offer rewards and some discounts, careful research needs to be done to make sure this type of card is of value to you. Warning: applying for a retail credit card in order to take advantage of a discount for applying – can have a negative impact on your credit rating (even if the card is never used).
Safe Care and Handling of Your Credit Card
The convenience of credit cards can be a trap for the unwary consumer. Here are some proven techniques for staying in control:
At David Sklar & Associates we work with people who are facing serious financial stress. Often, through no fault of their own, their credit problems have escalated to a point where they need the help of a Consumer Proposal and in some cases, a Bankruptcy. If you are in the Greater Toronto Area and facing serious debt problems, call us for a Free Consultation at 416-498-9200 or get started with our Quick Assessment Form to book your Free Consultation.
If your debt problems seem insurmountable – we can help. At David Sklar & Associates, our Licensed Debt ProfessionalsTM have the experience and knowledge to help you get out of debt. During your consultation, we will help you understand what your current financial situation is, how best to fix it, and how to move on to a better life. With six offices in the Greater Toronto Area – we are here to help.
Call Us Today For a Confidential & Free Initial Consultation Call 416-498-9200