With the arrival of our new Prime Minister Justin Trudeau, 2016 has been marked by several changes to our country’s income tax policies and other government benefit programs. This includes significant adjustments to the CCTB (Canada Child Tax Benefit), which as of July 20, 2016 has been officially named “Canada Child Benefit”.
We receive daily questions about different types of loans and the application processes that accompany them. One of the most common questions we receive is, “Am I eligible for a loan if I am currently receiving the Canada Child Benefit? “. The answer to this question varies from lender to lender, so here’s what you need to know about applying for a loan when your income comes from the Canada Child Benefit.
What is the Canada Child Benefit (CAC)?
The Canada child benefit is a type of payment that families or single parents can receive when they have one or more children under the age of 18. Some aspects of the benefit were modified as of July 20, 201. These changes were implemented with the goal of simplifying but also improving the program for current and future beneficiaries. Some of these changes include:
- A less complicated process (families will usually receive a specific monthly amount over a 12-month period).
- Different payment standards (families with lower incomes will receive a larger amount than those with higher incomes).
- An increase in the amount of the benefit (an average of $ 2,300 for 2016-2017).
- The beneficiary is now tax-free (families / parents will not have to pay tax for CEA on their tax returns).
The amount of the benefit depends on certain criteria, including the number of children you (and your spouse / partner) have, your age and your annual income. For example, families earning lower incomes (less than $ 30,000 per year) should have an average of $ 6,400 per year for each child under 6 years of age. Once the child (ren) reaches the age of 6 to 17, the benefit amount will be reduced to $ 5,400 per child per year. However, families with significantly higher incomes (more than $ 150,000 a year) will surely receive less. There is also an additional $ 2,730 per physically and mentally handicapped child who qualifies for the EHP (Child Disability Benefit).
In addition to all other changes to the Canada child benefit, the Canada Revenue Agency has issued a more specific “benefit calculator”, which requires a parent to enter more detailed personal information but gives a calculation more accurate of the amount the family will receive annually.
How can I receive the Canada Child Benefit?
Parents who want to become eligible for CAOT must file their income tax returns every year, regardless of their income, even if they do not currently earn any income. This rule also applies to their spouse or their spouse if this is the case. Once the parent is approved for the benefit, they will receive payment in monthly installments from July of the current year to June of the following year. Once the parent and spouse have filed their tax returns, the sum of their benefits will be recalculated starting in the next month of July, based on the details of their tax return, until the child or children reach the age of 18.
Why would someone receiving CEA need a loan?
There are many reasons why people have to apply for loans. Even when the government gives them some extra money annually. Families receiving ACE are no different from other families. In fact, based on parents’ current income and the number of children they have, it can be very difficult to support a family while managing all other possible expenses such as mortgages, car payments and so on. Some parents may even need a loan just to cover the costs of their daily expenses, such as shopping, rent or utilities.
It can be particularly difficult for single parents to have a high enough income to raise their children and finance their home, car and other necessary expenses, so a loan can help a lot in times of financial uncertainty. In particular, for multi-member families, parents and children. Emergencies can occur, whether medical or financial, which may require a loan to cover the costs associated with these situations.
How can I be approved for a loan I need?
For most lenders, banks and other organizations, qualification standards vary from loan to loan. However, the standards for their new customers remain relatively the same. In other words, any legal lender will want to know first and foremost if you are financially stable enough to pay back any money that is loaned, as well as the interest charges that apply. Depending on your lender, the application process may include the following checks:
- Your credit (file, history and rating)
- Your financial records (history of debt / bankruptcy, income etc.)
- Your employment history (usually from the last 2 years)
Since these categories are probably the most important points to check, other qualification categories may be subject to verification. It is preferable that all your financial and personal information be up-to-date and organized before applying. Also remember that there are several illegal lenders who are crooks and who might actually be trying to rob you, so make sure you know about the financial scams while looking for the online lenders.
Once you have found a legal lender, there are some simple actions you can take to put more chances on your side to be approved, in addition to being organized:
- Do some research and shop around the lenders. There are many different lenders that cater to all types of borrowers. Some have stricter qualification standards, such as having a high credit rating. If you do not have a high rating, there are other lenders who do not use this one as a deciding factor. Just be sure to read previous customer reviews and research this lender in the Better Business Bureau database to confirm that it is a real business.
- Calculate your debt / income ratio. This is a good way for you and your lender to know if you are financially stable to cope with the costs of a new loan. Add up the average total cost of your monthly payments and other debts, then divide it by your regular monthly income. You will then have a debt / income ratio. Ideally, your ratio should reach 30 to 35%, and lower if possible. If your ratio is higher than this, it may be better to avoid applying for a loan until you and your spouse can increase your income or find another way to lower your ratio.
- Find a co-signer you trust. Having a close friend or family member can help increase your chances of approval. Make sure that person is also financially stable and ready for the lender’s verification process.
- Check your credit. As mentioned above, many lenders do not check your credit. However, you can do it yourself and this is a great way to stay financially stable and manage debt.
- Pay off your debts. This is one of the most important things to do before making financial decisions. If you already have other debts (credit card bills etc.) it is better to pay them off before applying for a new loan. If you can pay off your debt and allow you to pay a loan at the same time, this is a better time to apply.
Loans and your Canada child benefit.
Depending on the number of children you have and their age, the amount you receive may be advantageous. This combined with your annual income should help you be approved for a loan you need. Provided that you and the spouse (or only you if you are a single parent) have the means to repay the costs of the loan payments. In this case, you should find a legal lender that will meet your needs.