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Online Guide for Newcomers to Prince Edward Island - Canada

Managing Credit and Debt

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When you apply for a credit (credit card or loan), you need to be sure that you will have enough money to make your payments, and pay all the regular household bills.

Things You Need to Know before Applying for Credit

Important

Avoid loan companies or 'payday' loans (small, short-term loans intended to cover a borrower's expenses until his or her next payday). They charge large fees and high interest rates.

When you want to borrow money or apply for a credit card, make sure you find out about things like:

  • What is the interest rate
  • When are the payments due and when you have to pay back the loan
  • What will be your monthly payment
  • Are there any fees for processing the loan or annual credit card fees
  • Are there any penalties if you pay the loan off sooner than specified in your agreement
  • What happens if you cannot make a payment

When you decide to apply for credit, it is a good idea to shop around for the best financial product for your needs. You should use only secure financial institutions like the banks and credit unions.

It is a good idea

It is a good idea to try to pay off your credit card balance completely each month. If you are not able to do that, you might be spending more than you can afford and should stop using your credit card until you pay it off.

Once you get a loan or a credit card, you need to make your payments in the full amount specified in the agreement with the financial institution, and by the due date each month. If you do not make your payments on time or not at all, or do not make full payments as specified, you can jeopardize your credit history.

Credit card companies often charge high interest rates of 18 to 21 percent. On your credit card statement the company suggests a small minimum payment each month. If you only pay the minimum payment each month, you will end up paying a lot more money in interest over a longer period of time.

Where to Get Help if You Can Not Pay All Your Bills

For one reason or the other, you may find yourself in a situation where you can't manage your bills and debt any more. It could be sudden unexpected expenses, sudden loss of income, or that you simply overestimated your ability to pay back when you borrowed the money or spent it using credit cards.

If you are having trouble managing your debt load, it can be stressful for you and your family, and affect your credit history. If you need help managing your bills or debts, you can contact one of the credit counselling organizations. [See Related Resources]

These organizations can help you look at your financial situation. The services they offer are free and confidential.

Credit counselling organizations give information about debt and credit card consolidation, budget counselling, and debt settlement and management. They also offer a number of online tools and resources that can help you manage your debt and budget better.