Personal Finance

advise needed for debt consolidation and asset building

  • Last Updated:
  • Jan 28th, 2021 3:42 pm
[OP]
Newbie
Nov 24, 2018
7 posts
3 upvotes
l5l3h3

advise needed for debt consolidation and asset building

need advice on my situation:
annual income 100k
credit score 724
cibc Uloc - 10.9%- 22k limit 9 k owed(locked for 3 missed payments 7 years ago)
cibc visa - 13.9% -22k limit 22k drawn

bmo visa- 11.9% - 4k limit 4k drawn

credit union visa - 11.9%- 14k limit 14k drawn
all accounts have no missed payments ever except cibc Uloc from 2014/2015
i was looking for uloc to consolidate with but no luck
need options
no investments. 100k plus room in rrsp, tfsa -unused.
currently changing lifestyle to increase cash flow.
18 replies
Banned
Jan 14, 2021
59 posts
106 upvotes
Good luck

https://www.creditcardscanada.ca/educat ... bt-issues/

Your CIBC, Credit Union Visa & BMO are at 100% utilization i.e. 35% of the credit rating criteria for score, and 100% individual on each credit product.

CIBC Uloc @ 45% utlization
Shahfaisal123 wrote: need advice on my situation:
annual income 100k
credit score 724
cibc Uloc - 10.9%- 22k limit 9 k owed(locked for 3 missed payments 7 years ago)
cibc visa - 13.9% -22k limit 22k drawn

bmo visa- 11.9% - 4k limit 4k drawn

credit union visa - 11.9%- 14k limit 14k drawn
all accounts have no missed payments ever except cibc Uloc from 2014/2015
i was looking for uloc to consolidate with but no luck
need options
no investments. 100k plus room in rrsp, tfsa -unused.
currently changing lifestyle to increase cash flow.
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Jan 27, 2004
45127 posts
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T.O. Lotto Captain
If you want real advice... post a list of your transaction history. Redact personal info & account numbers.

Do this for all your credit cards and checking accounts.

Now write a list of all your bills.

Tv, phone, rent, utilities, subscriptions and memberships.

You make a lot of money. So most likely you spend too much.

I guess 1 exception is if you have 3 kids and a stay@ home wife. But even then you can manage on that salary.

To be able to run up that much debt on such a high salary, means a spending problem.

You won’t get approved for debt consolidation. Luckily your accounts are @ relatively low interest rates.
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Dec 5, 2006
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Shahfaisal123 wrote: need advice on my situation:
annual income 100k
credit score 724
cibc Uloc - 10.9%- 22k limit 9 k owed(locked for 3 missed payments 7 years ago)
cibc visa - 13.9% -22k limit 22k drawn

bmo visa- 11.9% - 4k limit 4k drawn

credit union visa - 11.9%- 14k limit 14k drawn
all accounts have no missed payments ever except cibc Uloc from 2014/2015
i was looking for uloc to consolidate with but no luck
need options
no investments. 100k plus room in rrsp, tfsa -unused.
currently changing lifestyle to increase cash flow.
Hi Op

So you try to consolidate for which purpose? Lower interest? Better score?...

Also is it possible you focus on paying out at least one debt this year? Say 22k -cibc visa?
Member
Apr 16, 2015
273 posts
365 upvotes
Well, you mentioned that you are changing your lifestyle to increase cash flow. I don't know if that is increasing income, cutting expenses or both, but that is your key here. You have a solid income, so you just need to make a plan to pay down some of that debt. An extra $1000/month will have your debt paid off in about 4 years. If you can double that, you'll have it paid off in about 2 years . That would require quite a bit of sacrifice but it is just for a short period of time. Personally, I'd pay off that $4k BMO visa first, so that in 4 months, you'll only have 3 debts instead of 4. This will quickly give you the sense of making progress. Then start in on the higher interest CIBC visa.

I wouldn't be thinking of investments at this point since they likely won't earn more than the 11-14% you are paying on your debts. The only exception would be if you were thinking about saving for a house downpayment. In that case, I might split your available money by putting half on debt repayment and half on RRSP contributions which you can later use for a downpayment. This has a couple of advantages over TFSAs: (1 ) It will generate a tax refund which should be immediately used to pay off some of your debt; and (2) it can't be withdrawn for other reasons without big tax consequences, so you'll be less likely to take it out and spend it.
Newbie
Dec 1, 2017
29 posts
27 upvotes
Shahfaisal123 wrote: need advice on my situation:
annual income 100k
credit score 724
cibc Uloc - 10.9%- 22k limit 9 k owed(locked for 3 missed payments 7 years ago)
cibc visa - 13.9% -22k limit 22k drawn

bmo visa- 11.9% - 4k limit 4k drawn

credit union visa - 11.9%- 14k limit 14k drawn
all accounts have no missed payments ever except cibc Uloc from 2014/2015
i was looking for uloc to consolidate with but no luck
need options
no investments. 100k plus room in rrsp, tfsa -unused.
currently changing lifestyle to increase cash flow.
I've been in your shoes before. As others have mentioned your problem is likely spending. Do you have debts other than the ones listed (car, mortgage, student loans etc)? To give you meaningful advice we'd need to have a much clearer picture of your overall finances.

You're headed in the right direction though.
[OP]
Newbie
Nov 24, 2018
7 posts
3 upvotes
l5l3h3
Thanjs alot guys, yes i have already started cutting spending for 8 months now hence the drop in Uloc.
Paying off 1100 every month towards debt.

Last few years i left spending get out of hand.
Last edited by Shahfaisal123 on Jan 28th, 2021 2:43 pm, edited 1 time in total.
Member
Apr 16, 2015
273 posts
365 upvotes
Shahfaisal123 wrote: Thanjs alot guys, yes i have already started cutting spending for 8 months nie hence the drop in Uloc.
Paying off 1100 every month towards debt.

Last few years i left spending get out of hand.
Lots of us have been in that position at some point in our lives. $1100/month is a good start, but keep in mind that your interest charges are growing by about $500 a month, so your balance is only going down by $600. Try to cut a bit more if possible, or if that's too hard, pick up a side gig to bring in a bit more $ in the short term (deliveries, odd jobs, etc.). Instead of a line of credit, have you approached any lenders about possibly getting a consolidation loan that would require fixed payments every month at a lower interest rate? We did this years ago and it saved us a ton of interest and got us out of debt in a couple of years since we weren't able to accrue new debt, but I don't know what the situation is like now.
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Feb 8, 2014
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I suggest finding a debt counsellor who can help you navigate this.
You need to figure out why you are spending more than you earn and do something about it. $1100 a month is small potatoes.

And bear in mind that many people who pay off debt end up back into it years later because they never solved the fundamental problem that got them into debt in the first place.

Asset building comes after you have your debt under control, at this point forget it but when you are on solid footing your debt counsellor can help you move on that one.
In fact in Rand McNally they wear hats on their feet and hamburders eat people
Jr. Member
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Aug 14, 2020
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Hamilton, ON
catsoncoffee wrote: Well, you mentioned that you are changing your lifestyle to increase cash flow. I don't know if that is increasing income, cutting expenses or both, but that is your key here. You have a solid income, so you just need to make a plan to pay down some of that debt. An extra $1000/month will have your debt paid off in about 4 years. If you can double that, you'll have it paid off in about 2 years . That would require quite a bit of sacrifice but it is just for a short period of time. Personally, I'd pay off that $4k BMO visa first, so that in 4 months, you'll only have 3 debts instead of 4. This will quickly give you the sense of making progress. Then start in on the higher interest CIBC visa.

I wouldn't be thinking of investments at this point since they likely won't earn more than the 11-14% you are paying on your debts. The only exception would be if you were thinking about saving for a house downpayment. In that case, I might split your available money by putting half on debt repayment and half on RRSP contributions which you can later use for a downpayment. This has a couple of advantages over TFSAs: (1 ) It will generate a tax refund which should be immediately used to pay off some of your debt; and (2) it can't be withdrawn for other reasons without big tax consequences, so you'll be less likely to take it out and spend it.
This is an opportunity to build a good habit. If you can pay this amount or more while not spending, you can pay off the debt in X years. Now, don't even think about rewarding yourself yet with a purchase - not yet. Take that amount spent on savings and keep using it to build an investment portfolio or down payment for a house. Once you are successfully funding the investments/down payment AND you save some additional cash - you can treat yourself with a cash purchase and feel like you earned it. Just no more debt for consumer purchases.
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Quentin5 wrote: And bear in mind that many people who pay off debt end up back into it years later because they never solved the fundamental problem that got them into debt in the first place.
OP you need to read these words and take them to heart. You don't have a math problem, it's behavioral.

Your plan should look something like:
1. Pay off all your debt
2. Build an emergency fund (3-6 months of expenses)
3. Start investing for your future (retirement, down payment on a house)

Has to go in that order though. Your emergency fund is meant to keep you from having to take on more debt in the future.
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Booyayyc wrote: OP you need to read these words and take them to heart. You don't have a math problem, it's behavioral.

Your plan should look something like:
1. Pay off all your debt
2. Build an emergency fund (3-6 months of expenses)
3. Start investing for your future (retirement, down payment on a house)

Has to go in that order though. Your emergency fund is meant to keep you from having to take on more debt in the future.
While i agree with you (especially for quoting me) an emergency fund of a few grand is a good idea at the beginning so if he has an unexpected expense he won't have to add it to the cards. There are arguments both ways that debt repayment saves interest but its also a psychological hit which is really bad when trying to pare down debt.
In fact in Rand McNally they wear hats on their feet and hamburders eat people
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Feb 6, 2019
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Shahfaisal123 wrote: Thanjs alot guys, yes i have already started cutting spending for 8 months nie hence the drop in Uloc.
Paying off 1100 every month towards debt.

Last few years i left spending get out of hand.
(legit question, not trying to be a jerk - I am still learning)

Does it make sense to be paying down the uloc first? It is locked, so you are not gaining access to it, and it is the lowest interest rates of the debt

I would consider paying down the either the CIBC Visa first (highest interest), or the BMO Visa (eliminate one debt to feel better (snowball method))
However, I would keep going with the uloc if you are concerned you would just re-max the cc if you start paying it down

As others have said - a small efund would be wise, especially as you don't even have room on any of the cc if an emergency happens

best of luck with the rebuild - it took a while to get into the situation, it will take a while to get out....be patient and be prudent
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Apr 16, 2015
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rychicken wrote: Does it make sense to be paying down the uloc first? It is locked, so you are not gaining access to it, and it is the lowest interest rates of the debt
I agree, that's not the one to pay down first. In addition to the points you mentioned, it's also the only debt that isn't at 100% utilization rate, so paying the others down is better for your credit rating.
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Dec 12, 2009
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catsoncoffee wrote: I agree, that's not the one to pay down first. In addition to the points you mentioned, it's also the only debt that isn't at 100% utilization rate, so paying the others down is better for your credit rating.
I thought that overall utilization is what affects one's credit rating with the bureaus. Individual account utilization is more important when you are viewed by individual creditors.
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Jan 14, 2021
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@ROYinTO .......

Before delving into what the perfect credit utilization ratio is, it is important to understand the two ways that credit bureaus measure credit card utilization ratios. The first is the individual ratio for each credit card account and the second is the total ratio for all of your credit combined. The higher either ratio is, the worse the impact will be on your credit score. Credit utilization ratios make up 30% of your credit score making it the second biggest factor in determining your credit score, the first being your payment history.

Typically, a credit utilization ratio of 30% is considered to be perfect. While having a credit utilization ratio that’s too high can damage your credit score, so can a credit utilization rate that’s too low. Minimally using or not using your credit at all can hurt you because lenders won’t be able to effectively measure your creditworthiness since there aren’t any recent accounts to assess or ample history for them to review in your credit report.
ROYinTO wrote: I thought that overall utilization is what affects one's credit rating with the bureaus. Individual account utilization is more important when you are viewed by individual creditors.
[OP]
Newbie
Nov 24, 2018
7 posts
3 upvotes
l5l3h3
Thanks for all the advice guyz, reached out to a non-profit credit help place. Yes i can cut back a little more but need to finish creating an emergency fund, current placing $500/month toward it, as soon as i have 6k saved up will divert that as well towards debt payments.
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Shahfaisal123 wrote: Thanks for all the advice guyz, reached out to a non-profit credit help place. Yes i can cut back a little more but need to finish creating an emergency fund, current placing $500/month toward it, as soon as i have 6k saved up will divert that as well towards debt payments.
Sounds good on all fronts.
In fact in Rand McNally they wear hats on their feet and hamburders eat people
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Kimmychow wrote: @ROYinTO .......

Before delving into what the perfect credit utilization ratio is, it is important to understand the two ways that credit bureaus measure credit card utilization ratios. The first is the individual ratio for each credit card account and the second is the total ratio for all of your credit combined. The higher either ratio is, the worse the impact will be on your credit score. Credit utilization ratios make up 30% of your credit score making it the second biggest factor in determining your credit score, the first being your payment history.

Typically, a credit utilization ratio of 30% is considered to be perfect. While having a credit utilization ratio that’s too high can damage your credit score, so can a credit utilization rate that’s too low. Minimally using or not using your credit at all can hurt you because lenders won’t be able to effectively measure your creditworthiness since there aren’t any recent accounts to assess or ample history for them to review in your credit report.
None of that matters for real world lending principles

This silly forum spends way too much time analyzing utilization ratios which only affect credit bureau scoring.
No lender has ever had the need or requirement to calc an applicants utilization ratio and say oh no we have to decline this applicant because his utilization ratio is 40%.
The utilization ratios are highly predicated on the credit limits issued by the lending institutions you have accounts with.
Utilization ratios DO NOT predict ones ability to service their credit accounts - again we do not care about utilization ratios.
An applicant with a $500 balance on a 1k limit card is the same as one with a $5000 balance on a 10k limit card(utl ratio). Verified income is the deciding factor

The only ratios we care about is TDSR/GDSR/DTI
None of that is revealed on any credit bureau file.

During this current climate many lenders are reducing revolving and LOC limits which will skew utilization ratios upwards.
None of that matters if an applicant has lots of capacity and has shown serviceability.
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