Paying bills after their due dates, or receiving calls from collection agencies can be warning signs that your debt becoming unmanageable. There are steps you can take to get out of debt, like mapping out a plan to manage your finances. Here are some ways to get out of debt, and more information that will help you along the way.
Start with identifying what you owe. Create a list of all your debts. For each one, list the total amount you owe, the minimum monthly payment, and the interest rate. Your list may include:
A budget is a plan that helps you manage your money. It will help you:
Use a Budget Planner to find out where your money is going.
Once you have created a list of all your current debts, begin your plan. The types of debt and the amount of debt you owe will affect your strategy for paying them off.
By paying off the debts with the highest interest first, you’ll pay less interest. This will help you become debt-free sooner. List your debts in order from the highest interest rate to the lowest. Make the minimum payments on all your debts. Then use any extra money to pay down the debt with the highest interest rate. For example, payday loans often carry the highest interest rates of any debts you may owe, followed by credit cards.
Find out about interest charges and minimum monthly payments when paying off your credit card.
You may find it’s easier to start with your debt with the lowest balance. You’ll feel the accomplishment of paying off a debt sooner. This can keep you motivated to maintain your goal of becoming debt-free. However, this option may cost you more in interest over time.
If you have a personal loan with family or friends, talk to them about the money you owe. Commit to a payment schedule that works for you and the person who lent you money. You may want to consider writing post-dated cheques or setting up automatic money transfers in order to stick to the payment plan. This will also show that you’re committed to repaying them.
Set a payment timeframe that is reasonable and affordable. If your timeframe is too long, you may lose focus because of a lack of progress and you’ll pay more money in interest. If your timeframe is too short, you may not be able to keep up with your payments and start to feel it’s unrealistic to continue.
Once a debt is paid, consider closing that account. Only keep what you need and can manage responsibly. However, you should keep an older account open as your credit score is based partially on how long you have had credit, also known as your credit history. Closing all of your older credit accounts can make your credit history seem shorter than it actually is and can hurt your credit score.
You may consider applying for a loan or line of credit to pay off multiple debts with high interest rates. This is usually called consolidating your debts. Consolidating your debts means you’ll only have to make one monthly payment rather than paying each of your debts individually. A consolidation loan or line of credit may help you get out of debt if:
If you’re considering a consolidation loan, make sure to ask your financial institution which type of debts you’ll be able to pay off. Be careful to not to use the credit that you have freed up with your consolidation loan. If you do then you will have even more debt than before.
Here are some tips to avoid taking on more debt:
Good examples of ways you can save money may include taking public transit instead of driving your car and paying for parking, bringing your lunch to work, making your coffee at home, and using cash or debit instead of your credit card.
You can improve your credit score by making payments on your debts and bills on time, not using all of the credit that is available to you, and not applying for new credit if you don’t need it.
If you’re having trouble paying down your debt on your own, get help. With help, you’ll be able to evaluate your current debt situation, determine your present and future needs, make a budget, and find ways to pay off the debt. Before you sign up for services, it’s important to explore your options and compare the different services offered.
That’s our post for tips to manage your debt and get out of debt! Did you use any of these tips, or have others you think are helpful? Follow CanScribe on Instagram to share your thoughts and ideas with us!
CanScribe is committed to offering excellence in education. As a leader in online training, we hold true to our core values of integrity, honesty, and empathy. We facilitate the achievement of ambitions and goals to empower people in their professional and personal lives. CanScribe supports programs and initiatives, both locally and internationally, positively impacting the world around us.
By submitting this form, you are giving your express written consent for CanScribe Career College to contact you regarding our programs via email, telephone, and/or text. You may withdraw your consent at any time.