9 steps to pay off your debt faster

9 steps to pay off your debt faster

Debt management may seem stressful, but it is achievable if you have the right approach. And you don’t have to go through this alone. At Credit Canada, we’re committed to helping Canadians get out of debt and take control of their financial well-being.

Our team of experienced credit counselors have pooled their knowledge to create this guide to getting out of debt fast. Here are nine steps to pay off debt faster.

1. Don’t wait for the wake-up call

Delaying debt payments can negatively impact your interest rates and credit scores. Waiting too long may also cause interest to accumulate over time, making your debt unmanageable.

Religion doesn’t have to control your life, but you can’t ignore it either. Addressing multiple debts now can provide a sense of control and improve your mental health. On the other hand, allowing your debts to snowball can lead to… Sleep problems, anxiety and depression.

Addressing your debt problems early can provide peace of mind. Ignoring it makes it more difficult to solve as your options for intervention diminish over time. Seek help as soon as you feel your situation has become unmanageable (sometimes, long before your first contact with collection) so that you can access as many options as possible to control your situation.

You will be empowered by knowing that you are dealing with your financial challenges head on rather than waiting for a crisis.

2. Evaluate your financial situation

You have already taken the most important step: you have decided to act. Now, you should evaluate your financial situation. Here’s how:

• List all your debts: Include credit cards, loans, and any other debts.

• Note interest rates: Understand which debts are costing you the most to prioritize repayment

• Documenting monthly payments (debts and obligations): Add up the total amount you pay each month. Use our Debt calculator To enter all of the above.

• Compare your income with expenses: Use our expense tracker to determine how much you have available to pay off debt after covering the basics.

This process may be uncomfortable, and that’s okay. If you realize your situation is worse than expected, use this as motivation to seek help to get back on your path to financial success.

3. Think about sustainable spending

When analyzing your income and expenses, we often recommend the sustainable spending method, which is a long-term budgeting approach to managing money effectively. Here’s how it works:

1. Firstly, analysis: Take a hard look at your income and expenses. Understand how much money is coming in and where it is going out. Then you can find out whether you need to increase your income or reduce your expenses.

2. then, BrainstormingThink about ways to improve your cash flow, and ideas that can help you earn more and spend less. Consider setting goals, such as saving for emergencies or paying off debt.

3. finally, It changes: After you’ve done some analysis and brainstorming, commit to making positive changes to improve your cash flow.

When it comes to paying off debt faster, you have two main levers to pull: increase your income or reduce your expenses.

If you want to do the former, consider working extra hours, getting a part-time job, or engaging in freelance work.

If increasing your income isn’t an option, you’ll need to cut expenses to open up some money to pay off debt. (More on this below)

4. Focus on needs versus wants

Credit Canada’s free budget template can help you organize all of your monthly expenses into an easy-to-follow schedule. Once you determine how much money you need to set aside for monthly expenses, look for opportunities to reduce the excess. Some options include:

• Eat at home instead of eating out

• Cancel unused memberships

• Prefer generic brands over premium products

• Postpone purchases of large tickets

Here is a breakdown of essential and non-essential expenses so you can sort out your obligations:

You may be able to find things in your budget that you can easily do without, such as unused subscriptions, expensive entertainment, and expensive clothing. However, you also need to ask yourself, what changes are you willing to commit to that will make the biggest difference?

5. Change your biggest expenses

Housing and transportation are often the largest expenses in our budget. We’re not saying you need to sell your house. However, if you think your living situation is standing between you and becoming debt-free, it’s worth thinking about how turning things around can help you save money.

You may try:

• Downsizing
• Find a roommate
• Refinance your mortgage to lower payments

Consider carpooling or relying on public transportation, which may help you save fuel. You may want to consider replacing your car with something less expensive if you have a large car payment. This simple step can free up hundreds every month and bring debt freedom one step closer.

6. Choose a debt repayment strategy

Here’s an overview of some common repayment strategies worth considering:

Snowball method

The debt snowball method involves paying off your smallest debts first while making minimum payments on the rest of your debts. Once you’re done with the smallest debt, move on to the next. Allocate any money you were paying in the first payment to the second payment, and continue until you eliminate your debts one by one.

Avalanche method

Alternatively, you can try the debt avalanche method. This is similar to the snowball method, with a twist: You’ll target the highest-interest debts first. This approach will save you money on interest payments, but it requires a lot of patience, as your highest-interest debt may also be one of your largest accounts.

The avalanche approach may be a better fit if you have a lot of high-interest debt. The debt snowball may be better for you if you want to make some quick wins by eliminating some small debts first.

Debt consolidation

Debt consolidation involves combining multiple debts into one payment. You’ll no longer have to commit to six or more due dates, and you may end up saving money in interest in the long run.

There are two ways to approach debt consolidation.

Debt consolidation loan

You can get a debt consolidation loan, which will be used to pay off existing debts. If the interest rate on the loan is lower than your current personal loans or credit cards, you can save money in the long run. However, you will need strong credit to qualify for such a loan. If your credit score is low, lenders may not approve your application or may require a co-signer or collateral to secure the loan.

Debt Consolidation Program (DCP)

Another option is A Debt Consolidation Program (DCP)which are offered through non-profit credit counseling agencies such as Credit Canada.

Our program can be suitable for individuals with a lower credit score or limited credit history. Our certified credit counselors will negotiate with your creditors to consolidate your debts into one monthly payment, often significantly lowering your interest rate. Your debt won’t magically disappear, but it will become more manageable.

“I had to take out an emergency payday loan to cover my dog’s veterinary ICU fees over a year ago, and paying off that loan was absolutely devastating me financially (missing payments, mixing money between debt and credit cards, getting by on minimum payments, etc.). He helped me Debt consolidation program in get my interest rate 47.9% To approx 9%. Instead of paying $534 per month ($267 every two weeks)I’m just paying $295 per month“.

– Client certificate

Comparison table of debt repayment strategies

7. Set SMART goals

Setting SMART goals can keep you motivated and on track toward paying off your debt. These goals are specific, measurable, achievable, relevant, and time-bound.

A SMART goal gives you a timeline to work through concrete actions and a feeling of accomplishment when you reach it. Here’s how to create your own SMART goal:

• Calculate how much debt you haveYour income and expenses

• Calculate how much you can realistically pay toward your debt each month

• Divide your total debt by this amount to estimate your payment date

• Adjust payments to meet your goal as needed

For example, instead of saying “I want to pay off all my debt,” create the following goal: “I want to pay off all my debt in two years. I will do this by paying $500 toward my debt every month and tracking my progress quarterly to stay on track .

Your debt-free history may be months or even years long. The following tips will help keep you on track:

• Celebrate small victories

• Modify your plan if your financial situation changes

• Use a visual tracker to monitor your progress

Let’s say you get a pay raise and can afford an extra $500 a month to cover your debt. This development would adjust your schedule. You can eliminate months from your original deadline and save thousands in interest. Use our debt calculator often as your circumstances change as motivation to stay on track.

8. Lean on support

You don’t have to deal with debt stress alone. Seeking support from family, friends or professionals can make a big difference.

Credit Canada offers free personal plans and one-on-one counseling. Our certified credit counselors will work with you to create a strategy tailored to meet your needs and goals. Many Canadians have achieved success through our services, gaining the knowledge and confidence needed to manage their finances effectively.

You can also apply for Credit Canada GOLD, a financial coaching program that helps you make sustainable changes to get out of debt and stay out of debt.

Apply for Credit Canada GOLD.

9. Avoid common mistakes in paying off debt

There are many harmful myths and mistakes related to debt management that can prevent you from achieving debt relief. Some pitfalls you’ll need to watch out for include:

For best results, stick to your budget and payment plan and use automatic payments to avoid missing due dates. While holding yourself accountable is important, don’t forget to show yourself some grace and patience.

Mike Bergeron, director of consulting at Credit Canada, encourages those trying to pay off debt to take a slow and steady approach. “Don’t put too much pressure on yourself when it comes to paying off your debt quickly. It may backfire on you,” he says. “Slow and steady winning the race comes from consistent effort and perseverance.”

Additional resources and tools for paying off debt

Credit Canada offers a range of free tools, including budgeting worksheets and financial literacy materials, to help you manage and eliminate debt. Debt calculators are another great resource you can use. These tools reveal how long it will take to pay off credit card balances, personal loans, and other obligations.

Crush debt with Canada Credit Bank

Paying off your debt quickly requires focus and discipline. Sometimes, a little help and extra guidance is all you need. Credit Canada is here to work with you every step of the way.

Don’t wait to take control of your finances. Contact us today to speak with one of our knowledgeable credit counselors and learn how to pay off your debt faster!