A growing number of people in Toronto find it difficult to meet housing expenses, pay utility bills, and meet daily expenses. Many live paycheck to paycheck and are knee deep in debt. This is especially true for women, single mothers, immigrants, members of minority groups, and other groups in the low-income bracket.
How to Survive with Bad Credit
Housing: Securing Rental in Toronto
Keep in mind that borrowers with bad credit often find it difficult to secure rental in Toronto, even if it is a small 1-bedroom apartment or studio. There are different ways to go about this, one being to offer good references. Another option is to find a roommate with a very good or spotless credit score. A third option is to ask a friend or family member to serve as a cosigner or guarantor. In this case, the guarantor cosigns the rental agreement and is responsible for rent and other payments. If you are unable to meet your obligations, the landlord has the right to sue you and your cosigner.
Downsizing and Cutting down on Expenses
If you live in Toronto and have bad credit, the first step is to find affordable housing to save enough to pay your debt. The monthly rent for an 80 sq. m. furnished apartment is in the range of $1,900 – $2,300. This is a lot of money, especially if you have the place all to yourself. One option is to find a roommate and share all expenses, including rent and utilities. Utilities such as gas, electricity, heating, and water cost about $160 a month, so you will pay about $80 if you share. Another option is to downsize and find a small studio which will cost you about $1,200 – $1,400 a month. This is the cost for a furnished studio. Expect to pay about $110 – 120 for utilities such as gas and electricity. Other expenses to account for include gas or public transportation, food, entertainment, personal care products, etc.
In addition to downsizing, it is a good idea to cut down on expenses such as dining out, entertainment, and miscellaneous items. A cocktail drink will easily cost you $10 – $13 in a downtown bar or club. To save money, you may want to invite friends for dinner and cook at home. There are other ways to cut down on monthly expenses, for example, buying inexpensive and unbranded items, shopping for clothing in thrift stores, preparing lunch to take to work, and others. All these will help you save money for late and missed payments, loan balances, etc. What is more, a money held in a savings account serves as a safety net for urgent expenses and when things go wrong.
How to Deal with Bad Credit
One way to boost your credit score is to apply for a department store or secure credit card with a reasonable interest rate. Even if the rate is higher compared to standard credit cards, timely payments will help you improve your credit score. The next step is to diversify your credit mix to show financial institutions that you can manage different types of accounts. To this end, one idea is to apply for a small, short-term personal loan and make timely payments over the loan term. Obviously, there are lenders and financial products to avoid unless you are pressed for time and have urgent expenses. Payday lenders, for example, advertise short-term loans for bad credit but offer extremely high rates and unfavorable conditions.
Finally, the most important thing is to learn how to use credit wisely and budget and plan for the future.
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