In recent years, credit card debt has ballooned in Canada. In our practice, 93% of all our clients owe some form of money on credit cards, and the average outstanding balance is more than $25,000.
If you are struggling with credit card debt, payday loans, lines of credit or other unsecured loans, here are some strategies to help you reduce that debt.
Paying Off Credit Card Debt
It is possible to pay off credit card debt on your own. The question is, can you? There are a few ways to make this happen.
- Paying only the minimum balance, or interest only payments, will not reduce your credit card debt. It will be years before you pay off your balances following this strategy. To pay off the debt you need to pay a significant part of the principal of the money owed.
- Getting out of debt fast means finding ways to manage your money better. Painful as it sounds, make a personal budget, find ways to cut back on spending and put this amount towards debt repayment.
- Try reducing your interest costs. This may be accomplished by transferring balances to a lower interest credit card or negotiating new terms yourself with your creditors.
Paying off debt on your own is better for your credit rating. However, this is ONLY if you are able to keep up with your payments. If you are falling behind, making late payments or worse, missing payments, your credit score is already damaged.
Consolidating Credit Card Debt
If your debts are too large to tackle on your own, you may need more help. Your next step is to see if consolidating your debt will help you pay off your debts sooner.
Consolidating credit can help lower your monthly payments, but you will still have to pay off your original balance in full. How much interest you pay will depend on which strategy you choose:
- A debt consolidation loan can combine several high interest debts into one lower interest loan. You will need to qualify for a new loan and there are risks if you cannot meet the payment terms.
- A debt management plan is a way to consolidate several small debts into one payment plan through a non-profit credit counsellor. It is not a debt settlement program because you still pay 100% of the original debt. However, interest relief is often possible.
Settling or Eliminating Credit Card Debt
The safest way to eliminate credit card debt for less than the full amount owing is through a procedure under the Bankruptcy & Insolvency Act. These procedures include:
- Reducing your payments and settling your debt by negotiating a consumer proposal.
- Eliminating your debt by claiming bankruptcy.
Both of these options will eliminate not only credit card debt, but other unsecured debt including bank loans, payday loans, tax debts and even some student loan debt.
If you need help dealing with credit card debt, contact one of our experts today. We will meet with you, review your situation and help you come up with a plan to eliminate your debts sooner, rather than continue struggling. You may not even need to go bankrupt.Talk To A Local Trustee