Tag: credit card balances

HOW TO PAY OFF CREDIT CARD: CANADIANS NAVIGATING TO HUGE CREDIT CARD DEBT CRISIS

Post author By Brandon Smith
Post date June 3, 2024

how to pay off credit card

How to pay off credit card: Introduction to understanding the credit card debt crisis in Canada

The financial services researchers at TransUnion Canada (TransUnion) have recently reported a concerning trend among Canadians. Many households struggle to keep up with the rising cost of living and higher interest rates, leading to a significant increase in credit card debt. A recent report revealed that more Canadians are only able to make the minimum monthly payments on their credit cards, indicating a growing financial strain and not knowing how to pay off credit card debt.

The data from the TransUnion report paints a stark picture of the challenges faced by Canadian consumers. With the cost of living on the rise and interest rates climbing, individuals are finding it increasingly difficult to manage their credit card payments. The percentage of Canadians making only the minimum monthly payment has surged, showcasing the financial pressure many households are under.

Stagnant household incomes are failing to keep pace with inflation and interest rate hikes, pushing individuals towards relying on credit cards to bridge the financial gap. This shift in consumer behaviour has significant implications for long-term financial stability and underscores the importance of financial literacy and responsible money management.

The total consumer debt in Canada reached a staggering $2.38 trillion in the first quarter, a notable increase from the previous year. This surge in debt is a result of various factors, including the cost-of-living crisis and the influx of newcomers and Gen Z individuals entering the credit market for the first time.

Particularly concerning is the 30% increase in outstanding credit card balances among the Gen Z cohort compared to the previous year. This uptick highlights the challenges younger consumers face in understanding and managing credit responsibly, making them more vulnerable to financial hardships.

Interestingly, millennials currently hold the largest portion of debt in the country, accounting for about 38% of all debt. This demographic’s increased credit needs as they reach significant life milestones, such as homeownership and starting families, contribute to their substantial debt burden.

Despite these challenges, there is a sense of cautious optimism about the resilience of the Canadian consumer base. While there are concerns about missed payments among vulnerable populations, there is a belief that the market will eventually stabilize. Anticipated interest rate cuts could potentially alleviate some of the financial burdens for households over time.

Managing credit card debt and navigating the complex financial landscape in Canada requires informed decision-making and prudent financial planning. By understanding the factors contributing to the credit card debt crisis and taking proactive steps toward financial health, individuals can work towards achieving greater stability and security in their financial future.

How to pay off credit card: TransUnion Report analyzing the factors leading to credit card debt

Analysis of the percentage of Canadians making minimum *monthly payment**s on* credit cards

One striking revelation from the report is the concerning trend of an increasing number of Canadians resorting to making only the minimum monthly payments on their credit cards. The data indicates that the percentage of individuals opting for this minimum payment approach has risen by eight basis points, now standing at 1.3% compared to the previous year.

This trend paints a picture of households grappling with the mounting cost of living and the surge in interest rates, which poses a significant challenge in keeping up with financial obligations. Stagnant household incomes failing to match inflation and interest rate hikes have pushed many towards relying on credit cards to bridge the widening financial gap.

It is crucial to recognize the implications of perpetually making minimum payments on credit cards and not figuring out how to pay off credit card debt. This habit can easily spiral into accumulating debt and destabilizing one’s financial standing over time. Financial literacy and responsible money management are paramount in navigating these tumultuous waters and ensuring long-term financial stability.

Insights into the total consumer debt in Canada and the trends observed

The total consumer debt in Canada, as outlined in the report, amounts to a staggering $2.38 trillion in the first quarter, demonstrating a slight uptick from the previous year. This surge can be attributed to various factors, with the cost-of-living crisis and the influx of newcomers and Gen Z individuals venturing into the credit market for the first time playing significant roles.

Of particular interest is the notable 30% increase in outstanding credit card balances among the Gen Z cohort from the previous year. This points towards a learning curve for younger consumers as they navigate their initial experiences with credit, potentially rendering them more vulnerable to financial hurdles.

Moreover, millennials emerge as the segment with the largest debt share in the country, responsible for about 38% of the total debt. This can be attributed to their evolving credit needs as they reach pivotal life stages such as homeownership, starting families, and acquiring auto loans.

Despite these challenges, there is a glimmer of optimism regarding the resilience of the Canadian consumer base. While concerns loom over missed payments among vulnerable populations, there is a prevailing belief that the market will eventually stabilize. Anticipated interest rate cuts could alleviate some financial burdens gradually, offering hope for households navigating these financially turbulent times.

However, interest rate cuts will have to be significant for Canadians’ non-credit card debt to free up more cash in their budget to put towards credit card debt. Credit card rates of interest charged will always be high no matter where the Bank of Canada sets rates. So interest rate cuts themselves won’t help people figure out how to pay off credit card debt unless it creates a significant lowering of their non-credit card debt payments.

The financial landscape in Canada is intricate and dynamic, requiring individuals to navigate prudently to secure their financial future. With insightful reports such as this, we are equipped with the knowledge to make informed decisions and steer toward a path of financial stability and security.

How to pay off credit card: Impact on different generations

Credit card debt trends among generations

Gen Z Individuals: The report revealed a substantial 30% increase in outstanding credit card balances for the Gen Z cohort compared to the previous year. This surge signifies that younger consumers are just beginning to navigate the world of credit, learning to utilize it responsibly while meeting their monthly obligations. Gen Z’s entry into the credit market for the first time has significantly contributed to this rise in credit card debt.
Millennials: Currently holding the largest share of debt in the country at about 38%, millennials have distinct credit needs as they progress through significant life stages. As they start families, purchase homes, and take out auto loans, their debt composition has shifted from primarily credit cards to more diverse financial products.
Other Generations: Beyond Gen Z and millennials, other generations display varying levels of credit card debt influenced by their unique financial behaviours and responsibilities. It is crucial to analyze the reasons behind these differing debt levels to gain a comprehensive understanding of the financial landscape across different age groups.

Exploring reasons behind varying levels of debt

Each generation’s approach to credit card debt and how to pay off credit card debt is a reflection of their financial circumstances, habits, and economic conditions. Factors contributing to the varying levels of debt among different age groups include:

Financial Literacy: Understanding personal finance and the implications of credit card usage is essential. Generational differences in financial literacy levels may impact how individuals manage their credit card debt.
Income Disparities: Discrepancies in household incomes across generations can influence debt levels. Higher debt among certain age groups may stem from limited earning potential or challenges in keeping pace with inflation.
Life Stage Expenses: As individuals progress through life stages, such as buying homes or starting families, their financial needs evolve. These transitions can lead to increased credit card usage and debt accumulation.
Economic Conditions: External factors like interest rate fluctuations, cost of living changes, and overall economic stability play a significant role in shaping debt trends among different generations.

By examining these underlying reasons, we can gain valuable insights into the diverse approaches to credit card debt management among Gen Z, millennials, and other generations. It’s essential for individuals to be mindful of their financial decisions, seek financial education, and proactively address their debt to achieve greater financial stability regardless of their age group.

How to pay off *credit card**: Importance of* credit, financial literacy and financial planning

As a licensed insolvency trustee, I understand the importance of financial literacy in managing all debt, including, how to pay off credit card debt. In any consumer insolvency process, it is mandatory for the person going through either a consumer proposal process or a bankruptcy, to attend two credit counselling sessions with me. Individuals must comprehend the implications of only making minimum payments on their credit cards, as it can lead to accumulating debt, financial instability and never being able to know how to pay off credit card debt that is out of control.

Role of financial literacy in managing credit card debt

Financial literacy empowers individuals to make informed decisions about credit card usage.
Understanding interest rates, payment terms, and fees can help in managing credit card debt effectively.
By improving financial literacy, individuals can avoid falling into the trap of only making minimum payments.

Canadians need to prioritize financial health and seek out resources and support to manage debt effectively. By taking proactive steps to address their financial situation, individuals can work towards achieving greater financial stability and security in the future.

Tips for improving financial literacy

Educate yourself on financial terms and concepts to make better money decisions.
Create a budget and track your expenses to understand where your money is going.
Seek guidance from financial experts or attend financial literacy workshops to enhance your knowledge.
Avoid unnecessary debt and practice responsible borrowing and spending habits.
Stay informed about changes in the financial market and adapt your financial strategies accordingly.

By enhancing your financial literacy and making informed financial decisions, you can take control of your credit card debt and secure a more stable financial future. Remember, knowledge is power when it comes to managing your finances effectively.

How to pay off credit card: Strategies for managing how to pay off credit card debt

I have witnessed the challenges that many Canadians face when it comes to how to pay off credit card debt. It’s essential to address this issue effectively to ensure financial stability and security for the future.

One of the key strategies to manage credit card debt is to avoid making only the minimum monthly payments. While it may seem convenient in the short term, it can lead to accumulating debt and financial instability over time. Instead, I recommend paying more than the minimum amount whenever possible to reduce the overall balance.

Furthermore, creating a budget and tracking expenses can help individuals gain a better understanding of their financial situation. By identifying areas where spending can be reduced or eliminated, it becomes easier to allocate more funds toward paying off credit card debt.

Seeking support and resources for debt management is also crucial. Whether it’s through financial counselling services, debt consolidation programs, or online resources, there are various options available to help individuals navigate their debt repayment journey effectively.

Another effective strategy is to prioritize debt repayment by focusing on high-interest credit card balances first. By tackling these debts aggressively, individuals can save money on interest payments and make significant progress towards becoming debt-free.

Lastly, maintaining open communication with creditors can be beneficial. Exploring options such as negotiating lower interest rates or setting up a structured repayment plan can make it more manageable to pay off credit card debt on time.

How to pay off credit card: Navigating the path to financial freedom

For practical tips on how to pay off credit card debt, I invite you to read my January 2021 blog “PAYING DOWN DEBT: MY 7 ESSENTIAL YET EASY HACKS TO BE DEBT FREE“. Here are a few more tips to follow to help keep debt under control.

Establishing healthy *spending habit**s and avoiding excessive debt*

Developing sound spending habits and avoiding excessive debt is crucial for maintaining financial stability and ensuring long-term security. This necessitates exercising discipline and making responsible decisions when it comes to managing one’s finances. Prioritizing essential needs over-indulgent desires and crafting a comprehensive budget that aligns with one’s income and expenses are essential steps in this process.

It is imperative to resist the allure of impulsive purchases and diligently establish a savings plan as a safeguard. Additionally, vigilantly monitoring credit card usage and diligently repaying debts on time can effectively prevent the accumulation of burdensome debt, along with its associated interest and fees. By setting achievable financial objectives and adhering to prudent spending practices, individuals can successfully evade the perils of indebtedness and forge a solid foundation for a financially secure future.

Making timely payments and avoiding credit card balances

Ensuring prompt payment and refraining from accumulating credit card balances are essential for upholding a favourable financial standing. As responsible individuals, comprehending the repercussions of delayed payments and excessive credit card balances on our credit score and overall financial well-being is imperative. By making punctual payments, we not only evade penalties and interest charges but also substantiate our dependability and creditworthiness to lenders.

Consequently, this can yield improved credit terms and future opportunities. Equally significant is the avoidance of burdensome credit card balances, as they can detrimentally impact our credit score and trigger a perilous cycle of indebtedness. Through the practice of prudent expenditure and timely payments, we can accomplish financial stability and establish a robust groundwork for our prospective financial aspirations.

Building a strong credit history and improving credit rating

Establishing a robust credit history and enhancing creditworthiness is paramount for individuals striving for financial stability and future financial prospects. An impeccable credit history showcases prudent financial practices, thereby paving the way for diminished interest rates on loans, increased credit limits, and heightened chances of loan approvals.

To construct a formidable credit history, it is imperative to ensure punctual payments, maintain minimal credit card balances, and refrain from excessive account openings. Furthermore, consistently monitoring credit reports and rectifying any inaccuracies or disparities can significantly bolster credit ratings. By adopting proactive measures and adhering to responsible financial management, individuals can forge a solid credit history and elevate their creditworthiness, thereby securing a more promising financial future.

How to pay off credit card FAQs

What is the best method to pay off credit card debt?

Determining the optimal method for credit card debt repayment is contingent upon individual preferences and financial circumstances. The debt avalanche strategy prioritizes the repayment of debts with the highest interest rates first, whereas the debt snowball approach involves tackling the smallest debts initially. It is recommended to select the method that aligns with your personal goals and is most feasible for you to accomplish promptly.

How can I lower my interest rates on credit card debt?

One effective strategy for reducing interest rates on credit card debt involves consolidating your debt through a lower-interest-rate personal loan. By leveraging this approach, you can potentially minimize interest expenses, accelerate debt repayment, and enhance your financial standing.

What steps can I take to pay off credit card debt quickly?

To pay off credit card debt quickly, it’s important to first review your budget and reconsider daily spending habits. Consider packing a lunch instead of buying one each day and reconsider subscriptions that automatically come out of your account each month. Paying off high-interest debt as soon as possible and paying close attention to bill payments to avoid late charges can also help speed up the debt repayment process. Additionally, organizing your debt and choosing a method like the debt avalanche or debt snowball method can help you pay off debt efficiently.

How to pay off credit card: Conclusion

I hope you enjoyed this how to pay off credit card Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The information provided in this Brandon’s Blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

Brandon Blog Post

CONSOLIDATION LOANS IN CANADA: IS IT POSSIBLE TO CONSOLIDATE DEBT BY USING THIS 1 SIMPLE GOING POSTAL HACK?

Post author By Brandon Smith
Post date October 17, 2022

Debt consolidation loans in Canada

Debt consolidation loans in Canada can be an excellent means to conserve money and get your funds in order. By combining several financial obligations into an affordable single loan, you can frequently get a lower rate of interest and also reduced month-to-month payments. This can assist you to get out of debt quicker as well as save cash over time.

Prior to getting debt consolidation loans in Canada, it is very important to understand the terms of the financing and also to make sure you can afford the monthly payments. It’s also a good idea to look around and compare rates of interest and also loan terms from various financial institutions.

In this Brandon’s Blog, I discuss the concept of debt consolidation loans in Canada and a sort of new potential lender offering personal loans in Canada. I will also share another debt settlement and debt consolidation option that may be beneficial for people and companies who want to repair their financial situation.

Advantages as well as downsides of consolidation loans in Canada

Upsides

Debt consolidation loans in Canada can offer many benefits over making regular monthly payments on many different loans and debts with different interest rates. Interest rates on some debts, like credit card debt, can be categorized as high-interest debts, making it difficult to make a dent in the balance owing. if all you ever do is make the monthly minimum payment.

Consolidation loans supply a number of advantages, such as:

Reduced interest rates – Lenders normally give consumers reduced rates of interest on individual personal loans allowing them to repay their high-interest-rate credit card debt. Consolidation loans in Canada can be an excellent method to obtain a lower rate of interest and come to be debt-free quicker.

Reduce your monthly payments – Banks and credit unions usually offer debt consolidation loans in Canada with terms of up to 5 years. This, along with the lower interest rate, can help you save a lot of money in the long run and give you a lower monthly payment than the sum of the monthly payments required under your many debts.

A single payment instead of multiple payments – One of the best things about debt consolidation loans in Canada is that you only have to make one monthly payment. This makes it much easier to budget and stick to your plan. Instead of having to remember to pay six different bills each month, you only have to worry about one.

Potentially improved credit scores – Your credit report is a number that banks make use of to determine your creditworthiness. A high credit rating suggests you are a low-risk borrower, which is excellent. A bad credit rating indicates you are high-risk, which is bad.

By obtaining a debt consolidation loan, making on-time payments and paying it off on time without a payment schedule default or late payments, you are restoring your bad credit score in 2 ways. First, you have revealed that you had the ability to fully settle all of your other financial debts. Second, you are repairing your credit score by making the consolidation loan payments on time. It is not instant, yet in time, paying off debt consolidation loans in Canada will certainly improve your credit rating. Over time, you will see your credit score and credit report improve.

Downsides

There are a few downsides to debt consolidation loans in Canada, including:

Debt consolidation loans in Canada are often referred to as “easy money.” But they aren’t always easy. Even though many consumers think they qualify for a loan based solely on their disposable income, there are certain circumstances where Canadian banks will not see your monthly income in as good a light as you do. You will need collateral such as real estate, cars, boats, etc.

If you do not have these things, you may be at a disadvantage. Most banks will not lend money to someone with a low credit score unless they have some form of security, such as a car or house with enough equity. This makes sense because the lender knows that it is a debt consolidation loan you are applying for and by definition, you cannot pay off your credit card balances without their loan. They will want to protect themselves against the chance you may default on the loan.

When choosing a bank, you’ll want to compare fees, interest rates and prepayment penalties to ensure you’re getting the best deal. Keep in mind that the lowest fees don’t always mean the best overall value, so be sure to compare all aspects of the loan before making a decision. You might even consider getting one of the types of secured loans by raising money against your home through a home equity line of credit or a second mortgage. So compare your offers of secured loans and unsecured debt consolidation loans in Canada very carefully to consider all factors in deciding which is best for you.

WARNING: Stay away from private lenders, payday lenders and most alternative lenders who may provide loans just as expensive as payday loans. Their fees and high-interest loans will never be in your favour.

Consolidation loans in Canada: Can you consolidate student loan debt?

Students and recent graduates who find themselves buried under student loan debt often look for help. They want to consolidate their debts into one manageable monthly payment, but this can be difficult to obtain because there are few debt consolidation loans specifically designed for them.

Many recent graduates lack the credit history or income to qualify for a consolidation loan. They also generally do not have any free assets to qualify for a single secured debt consolidation loan to pay out over a longer period of time at a lower interest rate.

Unsecured loans to young people with a little credit history will be more expensive than one to an individual with a long-established credit history. That assumes that they can even qualify for this type of loan.

For these reasons, other than perhaps for a recent graduate from either medicine or dentistry who perhaps can roll their student debt into a professional loan, it will be very difficult to get consolidation loans in Canada to consolidate student debt.

Consolidation loans in Canada: Can going postal help you reach your financial goals?

Here is a potential new source for debt consolidation loans in Canada. Although it was not set up specifically for consolidation loans, there is no reason why you cannot use the money for that purpose if you are approved.

There is a new loan program offered by Canada Post which is designed to help people who are struggling financially, especially in rural areas where access to banking institutions is limited. It is called the Canada Post MyMoney™ Loan product. The idea is that you get a loan that’s based on how much you can afford to pay back, what you need the money for, and how likely you are to repay it.

The initiative is part of Canada Post’s commitment to helping Canadians manage their finances better. Their goal is to provide easy access to financial services and products that can help people save time and money.

To have your loan application considered, you have to be either a Canadian citizen or a Permanent Resident. You must be no younger than 18 years of age and you need to have annual earnings of a minimum of $1,000. Additionally, you need to not have been bankrupt within the 2 years before applying for the loan or had any of your financial debts handed off to a collection agency within the year before applying. They will of course also do a credit check on you.

In order to receive your loan proceeds, you must have a chequing or interest-bearing account with a Canadian financial institution in your own name. Borrowers of MyMoney™ loans are not required to offer any security against assets, in contrast to secured loans from banks and credit unions. Instead, applicants need only provide proof of identity, employment history and income. Both variable and fixed-rate installment loans are offered. The actual lender is TD Bank.

Consolidation loans in Canada: Other financial debt loan consolidation choices

You may not want to take on more debt to pay off your current debt. I don’t blame you and I get it. Or you may have been denied a debt consolidation loan. Here are some other options for consolidating your debt:

Balance Transfer Credit Cards

A balance transfer is simply when you move the balance of one credit card over to another credit card. For example, if you have a balance of $5,000 on your Mastercard, you can transfer that balance to a new Visa account that offers you 0% interest for 1 year on all balance transfers.

When you switch, you won’t have to pay interest charges for 12 months. After that, you’ll need to pay off the balance in full or start making payments on the balance transferred. Of course, you’ll still accrue interest after the interest-free period on the remaining balance.

Consolidation loans in Canada: Credit counselling

Credit counselling is a service that helps individuals to manage their finances and improve their financial situation. It can be done with a range of techniques, including budgeting, negotiating with creditors, setting up a plan to repay debt and monitoring actual behaviour vs. the plan.

Credit counselling can be an excellent way for individuals to take control of their financial obligations. It can help them create a plan to settle their debt, and provide them with the tools and knowledge they need to maintain financial literacy in the future.

There are many different credit counselling services available to choose from. You should select a community-based service to avoid being charged any fees. Be sure to stay away from any counselling service that charges fees, as this will only add to your expenses when trying to reduce debt.

Consolidation loans in Canada: Debt help is available with a financial restructuring program

Financial restructuring is a complicated and difficult procedure, however, it likewise provides individuals as well as businesses with a new beginning and a brand-new lease on life. Selecting to reorganize your finances with the help of a licensed insolvency trustee will certainly have temporary challenges, but can ultimately provide you with financial relief and a fresh start.

If you are considering financial restructuring, we urge you to consult with a licensed insolvency trustee to discuss your options. We can help you understand all of your options and work with you to develop a plan that is in your best interests.

Trustees are experienced in all aspects of financial restructuring and can supply you with the information and assistance you require to make the very best decision for your situation.

The most well-known financial restructuring tool for individuals is the consumer proposal. For mid-size companies and individuals with larger debt, it is a Division I proposal. For companies with debts greater than $5 million, restructuring is accomplished through the use of the Companies’ Creditors Arrangement Act.

Here is the best part. You should consider financial restructuring as getting an interest-free loan to pay off all your debts for a fraction of what you owe. I am qualified and experienced in all forms of financial restructuring, can explain this concept to you and am always available to answer any of your questions.

Consolidation loans in Canada: Before making a decision on your financial life needs – Call me

I hope that you found this consolidation loans in Canada Brandon’s Blog informative. If you’re sick and tired of carrying the burden of debt and ready to live a much better life, we can assist. We know exactly how it really feels to be in debt as well as feel like you’re never going to get ahead. We have actually helped lots of people and businesses that were in your position reach financial stability, so we understand it’s feasible for you to prosper in your objective of ending up being debt-free. Nevertheless, it will certainly require some work on your part. We’ll be right here to assist you with every action necessary.

The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too many personal unsecured debts , Credit card debt, income tax debt liability, unsecured loans or personal obligations from the running of your company or from being a business owner. These are all types of debt we can help you eliminate. We are aware of your financial difficulties and understand your concerns. Filing bankruptcy is the last option we explore only after we have exhausted all other options to avoid bankruptcy, such as financial restructuring through a debt repayment plan.

It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to give you the best management advice to get you out of your outstanding debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We are sympathetic to the financial difficulties you are experiencing and would like to help alleviate your concerns. We want to lighten your load by coming up with a debt settlement plan crafted just for you.

We realize that people and businesses in financial difficulty need practical advice and a workable solution in an easy-to-understand financial plan. The Ira Smith Team knows that not everyone has to file for bankruptcy in Canada. Most of our clients never do, as we are familiar with alternatives to bankruptcy. We assist many people in finding the relief they need.

Call or email us. We would be happy to give you a no-cost initial consultation. We can find you the perfect solution to tailor a new debt restructuring procedure specifically for you, based on your unique economic situation and needs. We provide a full range of services to people and companies. If any of this sounds familiar to you and you’re serious about finding a solution, let us know. We will get you back to living a happy life, whether or not there is an economic recession in Canada.

Call us now for a no-cost initial consultation. We are licensed professionals.

Brandon Blog Post

PAYING DOWN DEBT: MY 7 ESSENTIAL YET EASY HACKS TO BE DEBT FREE

Post author By Brandon Smith
Post date January 6, 2021

The Ira Smith Trustee Team hopes that you and your family had a restful holiday season and that you are all safe, healthy and secure.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this paying down debt Brandon’s Blog, please scroll to the bottom of the page and click play on the podcast

Paying down debt No. 1 financial goal of Canadians for 2021: Poll

A new survey states paying down debt is the #1 economic objective of Canadians to focus on heading right into the brand-new year. Many claimed that they handled more financial and high-interest debt this year to cover day-to-day expenditures and also offset a loss of revenue.

The annual CIBC poll says having a debt repayment plan has actually continued to be the top financial priority for the past 11 years. Unfortunately, what this says is that even without a COVID-19 pandemic, Canadians have been largely unable to do so. Everyone can be excused for 2020. Canadians have been grappling this past year with the financial and health challenges because of the coronavirus.

The purpose of this paying down debt Brandon Blog is to discuss the survey results and provide some tips on how to tackle debt that needs to be paid down. I truly believe that it is not your fault that you have not been able to be successfully paying down debt. You have only been shown the old ways that do not work anymore. Below I describe my 7 easy hacks for paying down debt. It is a new way of getting into the habit. It is a process that you can set up, track and see how you progress.

The survey found the 2nd monetary top priority of Canadians for 2021 after paying down debt is merely keeping up with bills as well as getting by. The survey showed that on average, Canadians expect a positive economic outlook for 2021. The poll results indicate that 24% of Canadians believe their financial position will certainly get better in 2021. This is down from 32% in 2019.

The poll also found the top economic issues facing Canadians in 2021 consist of the rising cost of living, the increased prices of goods and a sluggish economy.

Carissa Lucreziano, vice-president of CIBC Financial and Investment Advice, claims it is reasonable that Canadians are worried given the economic climate of 2020. She states the best buffer is to be prepared with a plan to satisfy your financial objectives, which includes a realistic estimate for paying down debt, that can be readjusted when situations alter.

How Debt Affects Your Credit Scores

The first thing you should know is that debts have a ripple effect across your whole financial life, including your credit history.

Revolving financial obligations includes a line of credit or credit card debt where you can churn, or rotate, a balance from month to month. You can obtain as much credit as you like up to an established credit limit. Interest is charged on any outstanding balance that is not fully repaid by the due date. Your regular monthly payment can differ on revolving debt based on your outstanding fluctuating balance.

Fixed financial debt includes mortgages, auto loans, personal loans and student loans. Most of the time, the amount of money you borrow, rates of interest, the monthly due date and the size of your monthly payment are fixed and known at the start.

With both revolving and fixed financial debts, you must pay promptly. When you miss a payment, your loan provider will report it to one of the two Canadian credit bureaus: Equifax and TransUnion. The credit bureau reporting of late payments can remain on your credit records for 7 years. When you miss a scheduled payment, you not only still owe that amount, but you will also have to pay late or default fees. Now the debt costs you even more!

Besides your payment history, there are other ways each type of financial obligation influences your credit score. With fixed installment debt, having a high outstanding amount does not have a huge effect on your credit score.

Rotating debt is a different story. If you are using a high percentage of your available credit from month to month, it will likely have an adverse result on your credit report and credit score. This is particularly true if you are doing it with numerous credit cards.

Your credit score will be negatively influenced because by using a large percentage of your available revolving credit, your credit utilization score is high. Credit utilization has considerable influence in calculating your credit score. So to keep your revolving debt outstanding as low as possible compared to your authorized credit, ideally, you ought to be paying down debt fully every month.

Why Credit Card Debt Is So Dangerous: My paying down debt calculator

When it comes to financial obligations, credit card debt is usually the most wicked.

Credit card companies can tempt you in with a low initial annual percentage rate (APR) and flashy credit limit. However, that introductory APR deal will ultimately end. When it does, you can find yourself looking at a frustrating heap of financial debt if you really did not handle your new charge card account properly. The reason revolving financial debt can be so frustrating is due to the fact that credit card interest rates are usually very high.

So, if you’re just making the minimum payment each month, it will certainly take you a long time to paying down debt. It could potentially take decades due to the interest accumulation.

Let’s say you put $15,000 on a credit card with a 19.9% APR, and then cut it up. You never get a replacement card and never spend another penny on that account. It is normal for a Canadian credit card to have a minimum monthly payment of 3% of the outstanding balance.

If all you do is make the minimum monthly payment, assuming you maintain the original minimum monthly payment as your balance declines, it will take you 25 years to pay off the full amount. You will also be paying more than double the amount you charged on the card. Here is the math:

Credit card balance	$15,000.00
Credit card APR	19.9%
Minimum payment	3%
Monthly payment	$450.00
Balance payoff	300 months
Total payments	$33,156.26

As you can see, paying down credit card debt this way is very expensive and I have not yet met a person who is comfortable paying down debt over 25 years, other than for perhaps the mortgage on their home.

How Personal Loans Impact Credit Scores

Personal loans also influence your credit score. Whether the loan account one-day damages or improves your score depends on 2 primary aspects: (i) exactly how you take care of the account and what else your credit history shows.

Too many applications could injure your score. That is because when you make an application for credit, an inquiry is logged onto your credit report. Too many such inquiries can damage your rating. The reason is that with more than one application close together in time, the formula assumes that you need the money and at least the inquiries before the last one turned you down.

Your credit might increase as your personal loan ages and there are no negative notations about missed payments. Initially, a new account could lessen your credit score. As your personal loan gets older and remains current, it shows you are using that debt responsibly. That can help your numbers.

A fixed personal loan might reduce your credit usage. Individual loans are fixed installment financings, which do not affect your revolving application ratio in any way. You can have a high balance on a fixed personal loan. If you pay off credit cards with a fixed installment personal loan, then your revolving utilization ratio must reduce. Over time, as long as you don’t get the credit card balances back up there and have the new personal loan outstanding, this can improve your credit score.

Your credit blend could also be enhanced with a personal loan. The credit scoring formula rewards you for having a diverse combination of accounts on your credit report. If you do not have any installment borrowing on your report, getting a fixed installment personal loan may improve your credit score. You just have to make sure that you are making your monthly payments on time for paying down debt. If not, it will damage and not help your score.

7 hacks for paying down debt quickly

Hack 1 – This is my first step to ending up being totally debt-free. This is important prior to anything else. You need to get some quiet time and start to make you’re coming to be debt-free goals real. It is a process that anyone can learn. Making those goals real does not suggest merely thinking them out for 5 seconds. What will you do daily when you are debt-free? What will it feel like? How will your life be changed? How will you feel? Write out this story on a notepad or better still a vision board. After that follow the rest of the steps below to begin to focus on your paying down debt strategy.

Hack 2 – Just how much do you intend to pay off in three months? In six months? You will make use of the steps discussed below to produce these objectives. The recommendation is that you have some shorter-term goals of just how much to save and therefore just how much debt to pay back.

These shorter-term goals need to feed into your longer-term objective. They’re easier to get to than the full objective. They also will certainly inspire you to keep going when you reach them. With your short-term objectives clear, it is time to prepare your month-to-month spending plan. It is a strategy of writing down where your money comes from and where your money is going.

You need to take the time to jot down every source of revenue you have and just how much comes from each one. You likewise need to identify and also write down where the money is going – line by line. As soon as you have done that, you can figure out where you can really decide if you can do any other activities to bring in more and what spending you can cut out. This will get you onto a savings plan, which will then give you the extra money to let you begin paying down debt.

I know I may have just lost fifty percent of you. This isn’t a budgeting blog site in itself. You have to create your budget plan on your own. I have written other blogs on the subject of budgeting which you can read here.

Hack 3 – I like fast small flares for saving cash. It will also reveal a great deal concerning the way you spend money. Start cutting back on things from your budget plan you have control over. Things like clothing purchases, eating out at restaurants (pre-pandemic) and other entertainment. I would hazard a guess that since the lockdowns and self-quarantining began last March, you have spent less on these types of spending than the year before. Go track it from your credit card statements, I bet you will see that is the case.

You can test on your own how to lower that spending in half or eliminate it out completely over the next 2 months. I am not discussing going cold turkey and not spending anything. I am speaking about a short-term challenge of a couple of months and on 1 or 2 spending things at a time.

These spending challenges work on so many levels. I am sure you will love them just like me. By only taking one or two items off of your spending, you are not attempting to save every dime.

You can still spend. You are simply trying out cutting down on a couple of things each time. Besides saving a lot of cash, this is going to reveal to you what you do not really care about in the spending side of your budget. You will now easily have gotten into the habit of not spending money on those things. You will now have savings in the form of extra money that you can use for meeting your paying down debt goals.

What is also great is that 8 weeks is right around the time it takes to construct brand-new behaviour patterns and breaks old habits. Those brand-new practices are most likely to drive you and help you feel that saving is not as difficult as you originally thought it would be. Maintaining these brand-new spending and saving behaviours is just one of the tricks for paying down debt.

How to get out of debt on a low income

Hack 4 – Next is doing a complete decluttering. Don’t worry, I assure you it’s a lot easier than it seems. You just have to get started. Go room-to-room in your residence and itemize every little thing you do not need. Specifically, those things you have not used in a long time. Set a rule such as have I used this, worn it or looked at it in the last 5 years? If the answer is no, out it goes. Do not second guess yourself. Stick to the rule.

This could include the treadmill you might have used only in the first 3 months after you got it, the out-of-date clothes that you never wear or the furniture you never ever rest on. Anything that isn’t being made use of or making your life better, offer it for sale online.

Not only are you making a little cash to help with your paying down debt. You are ridding yourself of something you do not need and someone who will enjoy it as much as you used to.

You may find that with some of the items, you could have squandered your money getting some of these things. But that was in the past. We are now only looking forward. It will also be a good memory to have the next time you think you need to buy something. I am sure you will analyze all future buying decisions differently.

Hack 5 – This is going to be another hard decision. However, it is one that a lot of people just have to do if they are serious about paying down debt. That is taking a sober look at how you travel every day.

I like seeing or paying attention to people talking about how much financial debt they have. What always astonishes me is the number of people who have a reasonable brand-new vehicle with monthly payments they do not have the money or budget to support. Seriously, people simply do not seem to see exactly how a high regular monthly auto payment is trashing their spending plan!

Besides the payment itself, insurance, licensing and maintenance costs come with the vehicle. I am not saying you cannot have nice things or that you need to never ever get a brand-new car or truck. Perhaps a clean vehicle in good condition that just came off a 3-year lease would be extra affordable and save you cash.

Appreciate your money! We do not have a great deal of time on this earth and you have to enjoy it. However, you can’t appreciate life if you’re constantly stressed out from your debt. So have a close look at what is parked in the driveway and be honest with yourself. Can really afford it?

By following this logic you will have extra cash each month that you can allocate to paying down debt.

Hack 6 – This tip most likely will eliminate lifestyle creep. Lifestyle creep is how your spending appears to increase every time your revenue does. The result is you are always stuck in paycheque-to-paycheque mode and are never paying down debt.

Just how is it that we get tax refunds or a raise, we never have enough that amount saved? You work overtime but the cash just appears to vaporize into thin air. It is the problem of lifestyle creep. Our spending plan always seems to grow to eat up whatever income there is.

Fighting lifestyle creep suggests referring back and monitoring your budget on a regular basis. Plug in that refund or additional income on an after-tax basis. Remind yourself how much you are spending. This will let you take that initiative to not spend even more if you now have a little extra. The very best thing to do is to designate that additional money for paying down debt and then to do it right away.

By having a place for that money, it stops being a temptation to spend it. It may not seem like it will conserve much however you would be surprised just how quickly normal smaller amounts will build up over time.

Hack 7 – My last money-saving method is going to put a freeze on your credit cards. Make the essential payments you have budgeted for by using cash. You simply do not obtain that very same psychological and emotional sensation when you use a credit card that you obtain when you pay with cash. When you pay with cash, you feel the purchase. Not so much with a credit card.

I’m not saying to cut up your cards. I have a credit card I use for company spending purposes and another for personal use. It is also handy to have one for emergencies if you do not have an extra money reserve yet from your savings. Stopping the use of your bank card will still keep that alternative open yet it makes you reassess your spending on practically every product.

Simply put, these 7 money-saving hacks will give you thousands of dollars over time. You can use that money first for paying down debt. Once your debts are paid off, keep up those same habits to build up savings for investment and ultimately your retirement. Each hack is simple yet effective. You will love to see how quickly you can make progress in paying down debt. Each one is not a major step, but combined together, they will have a profound effect on your debt payment plan.

***Paying down debt*: Do you want an avalanche of snowballs?**

The 7 simple hacks I describe above gets you the cash to use to pay down your debt. Now you actually have to do it. I am sure that you have heard of the two highly touted methods of actually paying down debt being the: (i) debt avalanche method; and (ii) debt snowball method. Dave Ramsey, a US financial commentator, is a strong proponent of these methods.

Here is a summary of the two methods for paying down debt. In the debt avalanche method, you pay off your debt with the greatest rate of interest initially, 2nd greatest next and so forth. In the debt snowball method, you pay off the single debt in total with the smallest outstanding balance first, second smallest 2nd and so forth.

The debt avalanche approach of paying down debt approaches the matter from a financial perspective. The snowball method is more psychological. Both get you to reduce your debt. Both help you reach your financial goal.

If you would like more details on both the debt avalanche and snowball payment plan methods of paying down debt, read my March 2019 blog – Debt Help Near Me: Our Toronto Debt Repayment Calculator Strategy.

Can I book a meeting with someone who can help?

Of course, you can. Contact the Ira Smith Team for your no-cost consultation. We can start helping you immediately getting into a pattern of paying down debt.

I hope you enjoyed this paying down debt Brandon Blog post. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore. The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of this seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.