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Canadians find it challenging to be debt-free as interest rates soar and the economy grows more uncertain.
Most people find it difficult to avoid penalties, despite their best efforts to make smart financial decisions.
Is managing your credit card debt with a low income getting tougher? Do you require efficient means of paying off your debts fast?
Do you want to know how to negotiate with your lender effectively?
Wait no more! Plastk has covered you with the best credit relief tips and strategies to help you get out of credit debt in Canada.
1. Prioritize What’s Important For You
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Realizing what's important to you is our first piece of advice for reducing your credit card debt.
The purpose of doing it from the beginning of your journey is to ensure you have everything planned out and know what must be paid as soon as possible.
- Outstanding balance,
- Additional fees,
- Charges,
- Interest rates,
While setting your debt repayment priorities, keep these items in mind.
Then, conduct a thorough evaluation of your personal finances. Finally, list your debts in your order of interest rate (high to low or low to high).
Of course, you can choose to pay whichever order you want (depending on your financial condition).
Here’s one order strategy (snowfall debt method) explained by the top credit expert:
Saying that, let’s break down the #1 tip a bit more:
2. Focus On One Debt At A Time
If you owe money on several credit cards, the overall amount you have to pay off can be too much for you to handle.
Heck, it might put you under duress and influence you to make poor decisions!
Therefore, the first piece of advice is to take a deep breath and acknowledge that: “Yes! I am deeply in debt,” but also vow to yourself, “I’ll get myself out of this mess!”
- Once done, you should analyze your mortgage debts, pending loans, etc.
- Then, choose the one that requires small continuous payments to pay off quickly.
You’ll notice as payments you make increase, the number of debts you have will start decreasing.
3. Budget Your Outstanding Payments
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You may keep track of your income and expenses as well as the things you spend your resources on by using a budget.
- Envelope Method
- 50/30/20 Budgeting Rule
- Pay First, Save Later
- Earning-Based Budgeting
These are some budget ideas and plans you can try and implement on your debt list.
You may also reduce excessive spending by becoming more mindful of your income and living costs.
4. Create A Repayment Plan With Your Lender
Your Equifax credit score and credit history might be compromised if you fail to pay even the minimum debt payments.
And, if your service provider has no idea about it, your terms will only worsen.
Therefore, it is advisable to speak with your lender and really discuss your circumstances.
In fact, you can enlist their assistance to design a financial plan that will make it simple to pay off all the debt.
5. Consolidate Your Credit Debt
You can tackle your debt payments better considering the debt consolidation method. However, persistence and timing are the keys to securing funds.
- You can look for a credit union, bank, or alternative lender in Canada.
- Consolidating debt can accelerate your relieving process as you only have to make one payment.
However, the key is researching all the lenders offering good interest rates and loan repayment packages.
See: How Credit Debt Consolidation Works In Canada?
6. Get Help From Credit Counseling
Several non profit debt counselors in Canada offer DMP services to Canadians struggling with high-interest rates and loan payments.
- They might offer multi-year (3 or 4) repayment solutions,
- The best part is you will make a single payment each month to the counselor (similar to consolidation).
Of course, it won’t help you in debt forgiveness, but a lower interest rate offer will help you pay off debt quicker.
See: A Comparison Between For-Profit & Non-Profit Consolidation!
7. Benefit From Consumer Proposal
If you’re looking for the safest credit debt relief option, this is it!
A consumer proposal is like a legal document that binds creditors to make repayments over 5 years.
All that is left is eventually forgiven after the set time.
- A consumer proposal is often a legal document provided by LIT.
- You can bargain with the firm to pay only a percentage of your debt.
- Debts can frequently be settled for up to 70% less than what was initially due.
In general, it's a good idea to have your debt reduced so that you're just paying back 20% to 50% of the entire value owed.
Bonus Tips To Pay Down Debt
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1. Time Is Money!
If you have an outstanding balance on your secured credit card that needs your immediate attention, start making small payments to it.
You must be thinking, why?
You must show responsible behavior if you want to negotiate with your lender!
If they feel you haven’t made any effort to solve your debt problems, they won’t be willing to help either.
So, a good recent credit history will only work in your favor, and they’ll know that you’re serious about changing your financial situation.
2. Patience Is The Answer!
No matter how good or secure the debt relief options are, you can’t solve everything the moment you start.
Of course, you can be lucky, but that’s hardly the thing in your case. :(
So, even if your consumer proposal was rejected (although it’s rare) or your consolidation loan didn’t get approved, you must not give up!
Continue to thrive, compare, and find new lenders that can offer you help.
3. Stay Relevant!
We understand that debt wasn’t your choice, but paying it should be!
What we mean to say is that you don’t want to show your lenders or loan providers that every financial decision you made was wrong.
Instead, focus on all the strategies you can come up with that can help you reduce the interest rate.
Note: Stick to your truth because if they find any faulty information, the chances to pay down your debt fast will be long gone!
FAQs
1. What is the best way to pay off debt fast?
Here are some tips you can consider:
- Pay from low-interest rate to high-interest rate order
- Try to make full or at least enough payments monthly
- Look into a government-supported debt relief program
- Talk to a professional to create a debt management plan
Read the complete guide to find more helpful options.
2. What’s the catch in debt relief?
A drawback of debt settlement is that you might just save a sum of money or even wind up owning more.
Your debtors aren't compelled to resolve your debt problems.
In fact, they can decide to go to court or hire a debt collector, which will worsen your financial situation.
3. Are consumer proposals worth it?
Absolutely yes!
In fact, it is the safest option to pay down your debt as you only have to pay a fraction of your total amount.
Moreover, usually, the amount is reduced to only a smaller percentage that is easier to pay initially.
However, of course, the lender isn’t forced to accept the proposal. But, they usually do or provide an alternative option to deal with the remaining debt.
Bottom Line
A lot of Canadians have a common wish: Ah, I want to get rid of my debt completely!
But not even half of the population is able to do so. In fact, the majority of people struggle to clear their debt balance all their life.
Living life shouldn’t be this hard!
So, to make it easier for you, we have curated this guide with 7 best credit options that can help you pay down your debt ASAP. Yes, sir! (Hehe :p)
Lastly, make sure to visit Plastk Blog to read more such helpful content. Happy reading!
