Author: Creditaid

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Student Loans: Your Saving Grace or Debt Trap?

You are 18 and all your friends are going to university so you follow the pack and sign up for some courses too. You intend to work part time so you only borrow $8000 in provincial and federal government student loans for the first year to help pay for your expenses.

In September you move out and put a deposit on an apartment. But now you need furniture so you buy some. You dip into your student loan money for both. You reason that since that you have a roommate- you can afford it.

After going to Mexico for spring break, your money runs out in late February. But you still need to get through two months of school! You increase the number of hours you work but then your marks suffer. You don’t finish your first year with straight A’s like you imagined.

Year 2- You still want to go to school but are not sure what field you want to go into. You decide to take more general arts or science course. You don’t want to run out of money again so you borrow $12,000 in student loans this time.

Year 3- Because your marks aren’t high enough to be accepted into law school, you decide to stay in university and declare history as your major and psychology as your minor. Or you dream of being a doctor and continue with your general science courses. You borrow another $12,000 in student loans.

Year 4- Ditto, and another $12,000 borrowed.

At the end of four years did you get into medical school? Or law school? Or another high paid profession?

If not, you could be in serious financial trouble. Even if you graduate with a B.A. or B.Sc., where are you going to find a job paying you enough money to be able to pay rent, your living expenses, make a car payment, PLUS your student loan re-payments. You now owe $44,000. The interest has been calculating since your last day of school and your payments are set at $444 per month. You are likely to have this payment for approximately 10 years. Unless you now have a high paying career as a result of your 4 years of education, you may struggle to pay your rent, car payment, and other living expenses for the next 15 years! What about being able to buy a house or starting a family?

Here are some tips to avoid the above scenario:

By all means choose a career that you think you will enjoy as you will be spending up to 1/3 of your life working at it. But be realistic. Ask yourself these questions:

1) Am I smart enough and do I have what it takes to successfully finish the schooling for this?
2) How much does this career pay? Some careers pay a higher salary in relation to others that required the same amount of education: 4 year Bachelor of Nursing degree, Pharmacy or Engineering degree vs. 4 year general arts or sciences degrees. If you graduate as a nurse, pharmacist or engineer your salary would likely be over $70,000 per year. With a general arts or science degree you might be lucky to find a job paying $35,000.
3) What are the job prospects in the province I want to live in? If you want to become a marine biologist but continue to live in Manitoba, find out what the job prospects truly are. In order to find work, maybe you need to become an aquatic biologist instead.
4) Choose a career where you are actually trained for a career that is in demand. Don’t study arts or science courses unless you intend to go into education or graduate with a master’s degree in that field of study.
5) Consider alternatives to university or college. You could join the military (Department of Defence). Because they require all sorts of professionals such as dentists, doctors, pharmacists, nurses, lawyers, etc., you may qualify for a program in which they pay for your schooling.
6) Reduce your expectations. If you had your heart set on becoming a doctor but your marks are not high enough, consider another medical related career such as a cardiology technician, sonographer or respiratory therapist. Or if you want to become a lawyer but your LSAT mark is too low, consider alternative career choices as a parole officer, government policy analyst or a career in human resources which deals with employment law.
7) HERE IS THE MOST IMPORTANT TIP: Don’t make the mistake of overlooking a career as a tradesperson. It has been estimated that by the year 2020, Canada will have 1,000,000 vacant positions. The apprenticeship system usually involves six months of schooling followed by six months of practical paid work (for a four year period) which can drastically reduce the need for student loans. There are many trades that pay six figure incomes. Don’t make the mistake of thinking that a university education will pay you more as this is simply not true.

Here are some general tips to avoid the student loan trap:

1) Buy everything USED. Second hand school books, clothing, furniture, equipment (including refurbished phones and computers) can save you thousands of dollars during your school years.
2) Make a monthly budget and keep track of your expenses. Be disciplined. If you struggle, instead of telling yourself ‘No’ and feeling sorry for yourself, tell yourself you can buy it once you are working full time.
3) Do not USE your student loan money to buy a car or go on a spring break trip. It should only be used for tuition and books. Do everything in your power to reduce your expenses while you are in school.
4) You are finally an adult and want to be on your own but it is in your best interest to live at home until you are finished school and working. Even if you have to pay ‘rent’ at home, it will likely be far less than if you move out. Then you’ll be paying rent, utilities, groceries, tenant insurance, cable and internet expenses, etc.
5) Do not ask (or let your parents) co-sign your student loans. As an adult you need to be
responsible for your own debt. Someday, if you are not able to repay your student loan
payments your parents will be forced to. If they are not able to make your payments their credit rating could be affected. It is also possible that their wages could be garnished.
6) If you move- always update the student loans departments with your new address. Don’t make the mistake of thinking ‘If the government can’t find me, they can’t make me pay’. If you do, two things will happen. The first is that your wages will be garnished. (They can track you through your social insurance number). You will lose up to 1/3 of your pay cheque until the debt is paid in full. The second is- you will now have a negative rating on your credit report. You may not be able to purchase a house or a car because of this. In order to rebuild your credit you will have to repay the entire student loan debt, plus the accumulated interest. It could take many years to rebuild your credit so that you qualify to buy a house or car. Don’t make the mistake of thinking that you can outrun your student loan debt no matter how many years have gone by.

Written by Creditaid Credit Counsellor, Laurie Boudreau.  Whether you’re a current student dealing with student loans or a recent graduate trying to make ends meet, speak to one of our counsellors today.  We have many tips to help you manage your debt.

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November is Financial Literacy Month

November is Financial Literacy Month in Canada! If you haven’t heard of this campaign before, it is a national initiative aimed at helping Canadians increase their financial knowledge. This is something we firmly believe in, here at Creditaid. We believe that when people are better educated on how the credit system works, they will be able to make better and more informed decisions when it comes to their personal finances.

If you are interested in participating in Financial Literacy Month – start by picking up or downloading a copy of the 2014 “Money Matters” calendar! The calendar will feature information and valuable money-saving resources for young people, families and individuals nearing retirement, including tips on managing debt, reducing the cost and length of a mortgage, talking to children about money and recognizing personal investment scams.

To download your copy – visit the Manitoba Securities Commission online at msc.gov.mb.ca.

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Have a Debt Free Christmas This Year

We can all relate to how frustrating it can be to start a new year with last year’s Christmas bills.  With Christmas being only a few more weeks away, we can be prepared for shopping season by planning ahead and creating a budget to work off of.

Here are a few tips to help you stay within your budget this Christmas:

  1. Create a Budget – if you shop without a list, it is easy to overspend or give in to impulse shopping.  Download our Holiday Gift Giving Planner that can help you get organized.
  2. Comparison Shop – starting Christmas shopping early also means you have more time to shop around and check prices at different stores.  Many online stores offer discounted prices or one day only sales.
  3. DIY Gifts- there are many gifts that you can make to give as gifts that won’t break your budget. You can tailor the gifts to the person you’re making it for – all the more thoughtful!

Careful planning can help you debt free – you just need to invest some time now to get organized.

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Selling Your Assets to Get Out of Debt

Life can throw many hurdles your way and sometimes you may find yourself in a situation where your debt has become more than you can handle. You may have lost your employment or had unexpected expenses that have put you in more debt than you are able to pay back. It is at these times that many look for creative solutions to satisfy their debts before it negatively affects their credit standing. One way to do this can be selling assets you own free and clear to pay off some or all of your debts. However, before you sell off something you own, take the time to consider a few points.

– How much will it cost to sell? While most items can be put up for sale through a local paper or even a website for little or no cost, there are some assets that will have costs attached. A old car that needs work may cost more to get running than it is worth to sell. Some other types of items may require a professional appraisal or other expenses to get any value from the sale.
– How much will it cost to replace? Even though you need the money now, you do not want to pay off one debt to end up incurring another. If you sell your car to pay off debt, just to have to buy another one that may not be in as good of condition, you may end off worse in the long run.

If you can easily sell an asset and not be saddled with any extra costs or issues down the road, it is a reasonable solution to a bad debt situation. Just be sure that you look at all the angles before selling something that will either not cover your debt or will cause you further debt problems later.

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Collection Agencies – Know Your Rights

When you are behind in paying a debt, creditors may turn your account over to a collection agency in an attempt to recover the amount owed. Whatever the situation is that landed an account in the hands of a collection agency, there are certain rules that they must abide by. It is important to know your rights when dealing with collection agencies.

– Written notification. The collection agency must notify you in writing that they have assumed your account. If you are receiving phone calls from an agency that has not sent you written notification, ask for this to be sent to assure that it is not a fraudulent action.
– Only pay what you owe. Collection agencies are not allowed to collect more than the amount owed in Canada. Their fee is taken out of the amount owed to your creditor so no additional fees should be added on top of what your originally owed the creditor.
– No harassment. While collection agencies are allowed to contact you to collect the debt, they are not allowed to harass you or your family. There are also certain times of day that are restricted from collection attempts, check with the rules within your province or territory.
– Contacting others to collect your debt. Collection agencies are not allowed to contact your friends, neighbors, family or any outsider to try and get information besides phone number or address to collect your debt.
– Legal action. You must be notified before a collection agency can begin attempting to collect the debt through legal or court action.

If you owe the debt, it is always best to pay it in full as soon as possible or make arrangements with the collection agency to do so. However, if you feel they are using illegal or unjust means to try and collect money from you, contact your provincial or territorial consumer affairs office and report the agencies actions.

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Debt and Divorce – How to Deal with it

Divorce is never easy, especially when it comes to splitting up assets and debts. In most cases, the married parties must agree on how to divide the martial belongings, both what is owned and what is owed. While assets are easily divided, debt is a little more tricky. Most martial debt that is in both of the couple’s names can affect both people for as long as the debt exists, regardless who the divorce papers say is in charge of paying it back. Before filing for divorce, couples should take in to consideration how it will affect their debt and credit situation.

Divorce decrees are not recognized by most lenders. If a marital debt is in both names of the couple, then it is still considered owed by both regardless of what the divorce court or papers have declared. For example, if the couple bought a boat together and the wife is awarded the boat and the loan that goes with it, the husband is still responsible if the payments are not made. Unless the wife is able and willing to refinance the boat in only her name, the husbands is still expected to make the payments if she does not.

Since many marital loans and debts may take years or even decades to pay off, as long as they exist, the couple is still tied to each other. One way to handle this is to separate debts into one or the others name only before the divorce. Another is to pay off the debts together before the divorce. For large ticket debts like homes or vehicles, it may be best to sell the property versus having one person take over the payments while the other person’s name is still attached to the debt. By dealing with the debt issue ahead of time, both people can go their separate ways without having a financial tie for years to come.

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Secured Debt vs Unsecured Debt – What’s The Difference?


When consumers buy on credit, there are two main types of debt that they can incur: secured and unsecured. The difference is fairly simple, yet they can be treated very differently in many ways. In basic terms, a secured debt has collateral that can be taken if the debt is not repaid. Unsecured debt is not attached to any tangible collateral, only the promise of repayment by the debtor. Because of this main difference, these two types of debt usually have different interest rates and consequences when they are not repaid.

Secured Debt
Most secured debt is for large purchases or investments. In these cases the loan is borrowed to buy a large purchase, such as a house, vehicle or boat. Because the loan is secured, interest rates are generally lower than unsecured credit. The item purchased is put as collateral with the stipulation that if the loan is not paid as agreed, the lending institution has the right to repossess the item. Another way secured debt is incurred is for cash loans. A person may use an item such as a home or vehicle as collateral to receive monies for personal reasons. Whatever is used as collateral is then subject to possible repossession if the loan is not repaid or if the person files bankruptcy.

Unsecured Debt
The most common types of unsecured debts are credit cards or signature loans. In both cases, credit is given based on the promise of the debtor to repay. While not repaying the debt will negatively affect the persons credit worthiness and score, usually the lender has no alternatives beyond reporting the unpaid debt to credit agencies. Due to this, unsecured credit and loans are generally at higher interest rates since they are a higher risk for the lenders. If the person files bankruptcy or does not pay, the debt is usually a complete loss for the lender.

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Work with St. Amant Important to Creditaid

When you live in a community as great as Winnipeg, you don’t have to look far for support of community efforts.

Look all around you to see evidence of how companies in our city are helping improve the lives of our fellow Manitobans, especially those who depend on organizations for vital care.

At Creditaid, we take pride in the assistance we provide to Manitobans. This is not only part of our credo as an organization, but extends to our volunteer efforts in the greater Winnipeg community. As such, we have been extremely supportive of St. Amant. A comprehensive resource for Manitobans with developmental disabilities, and autism, We believe strongly in the work St. Amant does, which includes a large residence for complex-care, 50 community sites and homes, the St.Amant Research Centre, the St. Amant School and River Road Child Care.

On Saturday, September 21, Creditaid will be taking part in St. Amant’s Free the Spirit Festival, 10am to 2pm at the John and Bonnie Buhler Reflective Gardens, and our President, Brian Denysuik, will be participating in the Fundraising Walk, benefiting the life-changing studies conducted by the St. Amant Research Centre. In addition to the walk, the day will be highlighted by games, music, snacks and prizes for the entire family.

If you would like to join us – or sponsor Brian – click here for full information.

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Money Savvy Teens – Share A Book To Help Them Learn The Basics


Learning how to manage money is part of growing up and a real skill that a teenager needs as they transition into adulthood. Unfortunately there are many bad influences out there, maybe even within your own extended family, which may be giving them the wrong messages. Teenagers often do not listen as well as they should to their parents on certain subjects, and it can be helpful to have an outside resource to reinforce good money management principles.

Money and Teens
The book Money and Teens by Wes Karchut and Darby Karchut is a great way to give your teenagers some useful financial wisdom without it coming across as a lecture from their parents. The book is written to include everything from opening bank accounts to how credit works and is a great reference, even for those who are well past the teenage years. Some money tips that are covered in the book include:

– How to check and read your credit report
– How missing a payment affects your credit
– Checking accounts and writing checks
– Protecting your financial security, i.e. PINs and login information
– How grocery and retail stores use tactics to get you to spend more
– A self-quiz to take when deciding whether you should buy something

The book is a basic guide to everything that you need to know about saving and spending money wisely. Many people in their twenties, thirties and, even, beyond may learn something they did not know from this book.

As parents, it is your job to try and give your children the skills they need to succeed. A big part of being an independent adult is learning to handle money wisely. Sharing a book like Money and Teens is a good way to solidify the lessons that you have been teaching them all along. It can be a useful guide for them to turn to as they begin to face financial challenges on their own.

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Explaining Savings Versus Spending To Your Kids

Teaching your kids good money habits is not easy. It is not a one-time tutorial, but instead an ongoing process of setting good examples, explaining money concepts and letting them learn by trial and error. However, it is an important lesson that is best learned from their parents. Teaching them the value of saving versus spending is the first step.

Learning The Value Of Saving
As frustrating as it may be to a young child not to get what they want, when they want it, it can also be rewarding. Most children learn the basics of saving through getting an allowance or payment for chores around the house and using that money to buy the things they want. However, many parents easily give in to children who beg and plead for a new toy or treat instead of teaching them the valuable lesson of how to save.

Beyond teaching children how money works, which is done to some extent in school, the more important value that parents can impart to their children is the satisfaction that comes from earning rewards. If a child wants a particular toy, explain the cost and what they will need to do to earn that money and how long it will take. Do not give in to children who already understand the concept of credit and asks to have the treat or toy now and promises to do chores later to earn it. This is exactly what you do not want to teach them! Instead, allow them the satisfaction of working hard to save the money they need to purchase the reward. They will appreciate what they buy even more, and learn a valuable lesson.

Financial lessons are better learned earlier than later, when credit scores can haunt them for years to come. Give your children the tools to learn the value of saving versus spending from the very beginning, to prepare them to be independent and financially responsible.