There is a big difference between what is required to be paid out on a private mortgage vs a bank deal. Specifically – in nearly all cases – credit card balances are not required to be paid out. Nor are credit cards required to be “closed”.
So not only is a private loan possible in cases where there are mortgage arrears, property tax arrears, Family Responsiblity orders, CRA garnishments and/or judgements, collections – there are far less restriction on what is done with the proceeds of the loan, as compared to a bank loan.
Out of proceeds, a private lender will require some things to be paid out of proceeds on closing by the lawyer. Any judgements or court orders will need to be paid. Property tax and mortgage arrears will need to be paid. Depending on the risk of the loan – garnishments that do not have an associated judgement might need to be paid.
But with rare exceptions, any “vanilla debts” will not be required to be paid out by the lawyer. You will be handed a cheque by the lawyer for the remainder of the proceeds, and you do with it as you please. Obviously it would be best if you did pay your credit card balances, unpaid collections, other debts – but no one is going to watch as you do so.
So unlike a bank mortgage, where all kinds of questions are asked as to what you are planning on doing with the money, unless it affects the lender’s security position, the private lender is unlikely to be concerned. You do not need to come up with some story or explanation as to why you wish to borrow.
In other words, when you call me – you may as well just say the real reason you are looking for a loan. It makes no difference to a private lender. Along with that, it will be far quicker if you simply state what is going on (CRA, Property Tax Arrears, etc) – as it is unlikely to affect whether we can put together a loan, and it immediately allows me to figure out how much money will be needed.