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The 6 Essentials to Getting Out of Debt

Accumulating debt can be stressful and stifling. If you have debt, you are not alone. Debt has been climbing in Canada for years. The average Canadian owes $1.67 for every dollar they earn per year.

When you have more debt than income, climbing out of the hole can seem impossible. Don’t worry; it’s not.  You just need to know where to start. Below you will find several tips you can use to help kick start the process of getting out of debt. As always, 310-LOAN stands ready to help with any of your lending needs.

1. Determine What You Owe

When you have an ever-growing amount of debt, the easiest thing to do is simply ignore it. This does nothing but create more problems - and you can't figure out a repayment plan until you know what you owe.

Start by gathering together all your credit card statements, car loan records, and any other debt you have. If you're not sure how much debt you have, pull your credit report. Both TransUnion Canada and Equifax Canada will mail you a free credit report, but they charge for your credit score. Luckily, you don't need your score at this point, so just get the free report.

2. Contact Your Creditors to Make Alternate Payment Arrangements

If you can't get a settlement, ask the lender or creditor if they would be willing to make alternate payment arrangements which could possibly lower the amount that is due each month.

Not all creditors will be willing to negotiate, but if you explain your situation, some may be willing to help you out.

Your credit report shows everything you owe and provides the basic information you need to find the businesses you owe. Armed with this information, you can start getting your plan in place to begin making payments, or to consolidate your debt.

3. Use the Waterfall Method

The waterfall method tends to be one of the most motivating methods to pay off debt. With this method, you pay the minimum monthly payments on all your accounts, but you devote any extra money to the loans with the highest interest rates. The higher the interest rate is, the faster the balance is growing.

Once that loan or card is paid off, roll the extra money to the loan or credit card with the second highest interest rate. Continue this waterfall method until all of your loans or cards are paid off.

The reason this works the best is simple: You are saving money in the long term by paying off the most expensive debts first.

4. Boost Income and Lower Expenses

In some cases, you may find that you don't even have enough money to cover even your minimum payments or that your extra money isn't enough to make a dent in your debt. If you can’t move forward, it's important to find ways to boost income and lower expenses.


5. Consider a Consolidation Loan

A consolidation loan can be an option for a lower-interest loan way that may help you to get out of debt faster. Generally, you need to have good credit to obtain one of these loans, but some banks or credit unions may be willing to work with borrowers with less-than-perfect credit.

Use the consolidation loan to pay off your current debts. Then, repay the consolidation loan. It saves you money by reducing your interest rate, but it also simplifies the repayment process. Instead of paying multiple bills and dealing with different due dates, you just make one payment. That helps you avoid late fees and better plan each month.

RBC is one bank that offers debt consolidation services. You can use their online RBC Debt Consolidation Calculator to calculate what your new monthly payments would be and how quickly you could be debt free if you consolidated your debt.

A word of caution: If you take out a consolidation loan, do yourself a favor get rid of your credit cards. If they are around, you may be tempted to use them.

6. Only Borrow Money if Absolutely Necessary

When you're taking serious steps to get out of debt, you need to make sure that you don't accidentally move backwards. Ideally, you should have an emergency account on hand so that you don't need to dip into credit.

If you run into a financial emergency, and are in a situation where your only option is borrow funds, make sure to work with a reputable lender (like 310Loan.com) who offers competitive on cash advances or payday loans that you can pay back quickly and get back on track to saving.

At 310-LOAN, we provide payday loans in Canada, but we also provide help and information. Check out the rest of our blogs for tips and ideas on everything from borrowing money online to getting out of debt. We are here to help with your financial needs.  Apply for a loan today with 310-Loan.

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