{"id":23541,"date":"2019-05-10T15:19:21","date_gmt":"2019-05-10T15:19:21","guid":{"rendered":"https:\/\/nomoredebts.org\/?page_id=23541"},"modified":"2024-12-12T05:47:01","modified_gmt":"2024-12-12T13:47:01","slug":"handle-credit-card-debt-and-debt-repayment","status":"publish","type":"post","link":"https:\/\/nomoredebts.org\/blog\/dealing-with-debt\/handle-credit-card-debt-and-debt-repayment","title":{"rendered":"What Is the Best Way to Handle Credit Card Debt and Debt Repayment?"},"content":{"rendered":"

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What Is the Best Way to Handle Credit Card Debt and Debt Repayment?<\/h1>\n

Do you want to know the steps for the best way to handle credit card debt and debt repayment? Paying off credit card debt<\/a> is one of the biggest financial hurdles Canadian consumers grapple with. Between hefty interest rates and making only the minimum payments each month, it\u2019s hard to get out of debt. If you\u2019re determined and keep organized with your accounts, getting out of debt is an attainable goal. Here\u2019s how to do it:<\/p>\n

Figure Out How Much You Owe<\/h2>\n

Your first step in managing your debt is taking stock of all of your accounts \u2013 namely, which creditors you owe money to and how much, your due dates, the interest rates for outstanding debt, and any penalties or late fees.<\/p>\n

Getting a copy of your credit report <\/a>may be a wise move in case you\u2019ve forgotten about some outstanding accounts. Put your documentation in writing \u2013 looking at the debts all tallied up and getting a firm grasp on all of your accounts will help you plan your next steps.<\/p>\n

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Create a Debt Repayment Plan Within Your Budget<\/h2>\n

Now that you\u2019ve assessed the damage, you\u2019re almost ready to carve out a debt repayment plan. How much you can afford to put towards your debts every month depends on what\u2019s feasible within your budget.<\/p>\n

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Your budget typically takes into account all of your fixed expenses<\/a>, like rent, bills and transportation costs, along with your discretionary spending on categories like groceries and entertainment. When debt repayment is a major priority, this needs to reflect in your budget. However, avoid slashing expenses drastically right from the start to come up with funds to put towards debt. While you need to ensure you\u2019re earmarking enough of your income to paying all your creditors, you also need to make sure you don\u2019t neglect other essential expenses. All of this needs to be worked into your budget.<\/p>\n

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Tip!<\/strong> Savings is crucial to getting out of debt \u2013 here\u2019s why.<\/a><\/p>\n<\/blockquote>\n

It will take some juggling to get your budget to balance, and that is why we created this free, downloadable interactive budget spreadsheet<\/a>. It can help you adjust numbers in real time.<\/p>\n

Related<\/strong>: How to Budget and Create One That Works<\/a><\/p>\n

Decrease Your Interest Rates<\/h2>\n

Get on the phone and call your creditors to ask them for a lower interest rate. While this may seem like a scary step, it could pay off in spades if, for example, a credit card company is willing to drop your interest rate on your debt from 29% to 19%, or even more. This proactive move could help you focus on paying off your principal debt instead of lots of interest. While there\u2019s no guarantee what they\u2019ll be able to help you with, you don\u2019t get if you don\u2019t ask.<\/p>\n

Practice before you phone \u2013 write down the creditor, how much you owe, your current interest rate, and what you\u2019re hoping for. Let your creditor know if you\u2019ve fallen into hardship with for instance, a job loss or health crisis, and tell them how much you\u2019re able to pay them each month to get your debt paid off. It is crucial that you are honest with them and have the ability to follow through with whatever you promise. Reneging on your promise will only make things worse in the future.<\/p>\n

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Important! <\/strong>If you have not made payments in a period of time, or want help to prepare for a phone call with your creditors, contact us <\/a>before you communicate with your creditors<\/a> for important information that could impact your debt repayment. Call us at 1-888-527-8999<\/a>, email us<\/a>, or chat anonymously online<\/a>.<\/p>\n<\/blockquote>\n

Choose the Best Strategy to Pay Off Debt<\/h2>\n

The best strategy to pay off debt is the one that works for you. And thankfully, there are handfuls of ways you can pay off your credit card and other debts. Some consumers may choose to tackle their highest-interest credit card accounts first while making the minimum payments<\/a> on the others. Once that card is paid off, all debt repayments are then funnelled onto the next highest interest card. This is called the avalanche method.<\/p>\n

Others may prefer to address debts with the lowest balance first, while making minimum payments on the others. This is called the snowball method. In this instance, consumers may get a boost from wiping out a single debt at a time and the desire to maintain the momentum.<\/p>\n

Snowball vs Avalanche, Which Is Better for Paying Debt Off? <\/a><\/p>\n

Consider Debt Consolidation \u2013 There Are Different Types<\/h2>\n

Debt consolidation is another option if you have hefty debt loads, and there are different ways to consolidate your debts. If you have access to a low interest credit card, or qualify for one, it might be an option, but credit card debt consolidation<\/a> can quickly lead to a never-never plan. Debt consolidation with a line of credit<\/a> can lead down the same path if you\u2019re not extremely diligent about using it as a debt repayment tool.<\/p>\n

The reason for this is because credit cards, lines of credit, and overdrafts are examples of revolving forms of credit. You can use them, make a payment, and use them again \u2013 over and over. If you want to borrow money to pay off your debts, ask your lender about a debt consolidation loan<\/a> at a reasonable interest rate instead.<\/p>\n

Another type of debt consolidation is a debt management program<\/a>. In this instance, you\u2019d work with one of our Credit Counsellors to combine your payments into a single, affordable, monthly sum based on your budget. Don\u2019t worry, the Credit Counsellor will help you figure your budget out, and if it\u2019s a good option for you to consider, the Counsellor explains the program in detail. If you want to know more, give us a call<\/a> and we\u2019ll be happy to answer your questions.<\/p>\n

Automate Your Payments<\/h2>\n

Now that you\u2019ve chosen a plan of attack, you need to stay on top of when payments are due. The wisest decision you can make is to automate your payments so you don\u2019t miss any. This can be accomplished in 2 ways:<\/p>\n