Many Canadians hold significant debt. A 2011 TransUnion Canada study reveals that the debt of the average Canadian consumer, excluding mortgages, amounts to $25,597. Though it may seem impossible to dig out from under a mountain of debt, there are ways to reduce it. Read on for helpful debt management tips.
- Among the most important debt tip is to stop adding to existing debt. Get rid of most of your credit cards, saving just one for emergencies.
- Calculate your debt-to-income ratio. Some debts, such as mortgages, are a fact of life. Credit card debt and car loans are more avoidable types of debt. The ratio of recurring payments, such as credit card minimum payments, to gross income should not exceed 35 percent. The only way to lower this ratio is to increase income or lower debt.
- One of the most important tips to pay off debt involves contacting your credit card company. Add up the number of credit cards you have and calculate the interest. Phone your lender. You may be able to lower your interest rate.
- If you have difficulty making payments, contact creditors and tell them how much you can afford to pay each month. Ask to speak to a supervisor, and get all the new agreements in writing before proceeding with a new payment plan.
- Debt reduction tips include creating payment methods that spotlight actual spending. Create a monthly budget, and follow it. Some experts advocate the envelope method of bill payment. Place cash in different envelopes allocated for costs such as entertainment, groceries and gas. Following these debt tips will help you become more aware of your spending.
- In the area of debt tips Canada is fortunate to have a number of debt relief professionals who can provide expert advice. You may wish to consult a credit counsellor. Doing so may benefit you in the eyes of creditors. Credit counselling will help you explore various options for debt relief and give you tips to pay off debt.
- A debt relief professional might recommend debt consolidation, which involves grouping the debt from a number of loans into one monthly payment. Advantages include lower interest payments, lower total monthly payments and simplification of the bill-paying process.
- Alternatively, a debt relief professional may recommend debt settlement, a program in which creditors agree to cut credit card debt in exchange for a one-time payment. The professional will lay out a budget for the consumer and negotiate a settlement with creditors, after which the debt will be erased.
- Bankruptcy exists as a last resort for some consumers, depending on the amount of money owed. Though your credit will be damaged for several years, your debt will be gone. You can make a fresh start, saving the money you had previously been paying to creditors and following debt tips to maintain a financially healthy lifestyle.
While the best debt management tips include the advice to not incur any debt at all, we live in a world where bank loans, credit cards and student loans have become a way of life. Following some of these debt reduction tips will relieve stress and pave the way for a healthy financial future.
Not sure if you can do it on your own? A professional debt relief solution can help. Fill out the debt relief form for free information on how to get started.