When you have a large credit card debt, it hinders your ability to save for the future, a rainy day, your retirement, or any of your other financial goals. Large debt means larger interest payments, and it becomes a bigger financial burden just to pay off interest, not to mention shrinking your debt. If you’re struggling just to stay where you are and not go further into debt, you’re not making progress on your financial goals, and it’s time for something to change.
In 2016, the average Canadian was carrying $21,000 in debt, not including mortgage debt, according to Licensed Insolvency Trustees David Sklar & Associates. That means bills, credit cards, car loans, payday loans, and more, were weighing down Canadians so much that on average they owed 42% of their annual income. You need to break out of the cycle of debt, but saying is easier than doing, and when you’re facing huge interest payments, it’s hard to see a way out. Below are some tips that can help you take back control and start to rebuild your finances.
#1 Go Card by Card
Many people with large credit card debt are using multiple cards, and the task of reducing credit card debt is much simpler if you focus on going card by card. Stop buying things on all your cards and stop paying just the minimum payment each month. By focusing on one card at a time, the task seems far less daunting. When it’s finally paid off, don’t be tempted to start using it again, just move on to the next one.
#2 Transfer Your Balance to a Lower Interest Rate Card
Be careful if you want to transfer your balance from a higher rate card to one with a lower rate, and always read the fine print. Often, there is a low-interest rate window, and you have to commit to paying off the debt within that window. Do the math: if there’s a fee for transferring the balance, how much are you adding to your payments, and is it worth it?
#3 Stop Living on Credit
Living on credit is the quickest way to generate debt you can’t pay back – it’s something that happens when you are in-between jobs. If you find yourself living with financial constraints, adjust your lifestyle to within your means. That may mean selling your car and taking transit or even selling your home for a smaller one.
#4 Start the Consumer Proposal Process
A Consumer Proposal is an agreement with your unsecured creditors to reduce the total debt that you owe and give you more time to pay it off. A Consumer Proposal can only be filed by a Licensed Insolvency Trustee, and in Toronto Licensed Insolvency Trustees like David Sklar & Associates also handle credit counselling. Credit counselling is a requirement for filing for bankruptcy or a Consumer Proposal, but going through counselling also gives you the skillset to manage your debt in the future.
If you’re overwhelmed by debt or debt is getting in the way of your goals, visit David Sklar & Associates and find out how you can apply for a Consumer Proposal or start credit counselling. It’s your future; don’t let debt control it.