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August 28, 2019 | By: Paulette Thompson

What's the Best Way for Getting Out of Debt

Debt Management | Debt Relief

If you’re struggling financially, you’re probably wondering what’s the best way for getting out of debt. It’s an issue affecting many Canadians. In fact, according to a recent poll, 46% of Canadians say they’re $200 or less away from financial insolvency. Plus, with interest rates continuing to rise, more than half of all Canadians say they’re feeling the pinch. So what’s the best way to go about getting out of debt? Our free Debt Assessment Quiz can help answer that question for you.

Use Our Debt Assessment Quiz to Determine the Best Way for Getting Out of Debt

We understand that everyone’s financial situation is unique, so there’s not exactly a single “best” way to get out of debt. The method that’s right for you won’t necessarily work for someone else — it all depends on your personal situation. That’s why we developed our Debt Assessment Quiz.

By answering four easy questions, you’ll get an idea of what your best debt relief options are. (Now, this isn’t an exact science, so it’s always smart to speak to a certified Credit Counsellor after getting your results, just to make sure you get all the facts you need to make the best decision for you). But before you take the quiz, there are some things to keep in mind. 

Know Your Income vs. Expenses

How much money do you have coming in and how much do you have going out in a typical month? It’s an important question to ask when determining your best option for getting out of debt. 

To get a better grip on your finances, it helps to track your monthly expenses. An expense tracker can help you create a useful budget, curb unnecessary spending, simplify and consolidate expenses, and just generally keep you on a better financial path. You can learn more by checking out our blog, Why You Need To Have a Weekly Expense Tracker.

Debt Warning Signs

Some financial distress warning signs include losing sleep over finances, missing bill payments, using one credit card to pay off another, or receiving collection calls. When you don't keep up with bill payments, your credit score plummets. But that’s not the worst of it. Creditors can actually take you to court to recoup what’s owed to them, cars can be repossessed, and in worst-case scenarios, you could lose your home. Depending on your particular financial situation, our quiz can help point you in the right direction to resolve your debts.

Understanding Your Debt Assessment Quiz Results

Once you’ve completed the debt assessment quiz, you’ll receive suggestions on your best options to get out of debt. This can include:

Managing Your Debt On Your Own 

Your debt crisis might not be as bad as you think, and all you really need is a slightly different approach to managing your money. This can involve taking a closer look at your current debt repayment strategies and figuring out a better way for you to pay down your debt, such as the snowball or avalanche method of debt repayment. Our Debt Calculator can help you determine your best debt repayment options. 

Using a Debt Consolidation Loan to Pay Off Your Debt

Rather than paying back debts individually, you may want to consider a debt consolidation loan. It’s important to know that interest rates on debt consolidation loans can vary wildly, so borrowers need to do the math to make sure the interest rate on the debt consolidation loan is lower than it is on their individual debts and credit cards. But even so, for many Canadians in debt, getting a debt consolidation loan might not be an option as a good credit score is required by most lenders.

Paying Off Your Debt through a Debt Consolidation Program

Unlike a loan, a debt consolidation program or DCP involves working with a certified Credit Counsellor from a not-for-profit credit counselling agency who will help you pay off your unsecured debts over time. Your Credit Counsellor will put together a proposal which details what you’ll be expected to pay each month. They will also negotiate with your creditors on your behalf to stop or reduce the interest on your unsecured debts. This can help you get out of debt much sooner than you would on your own (often in just 3-5 years). All collection calls will stop and the best part is that you can get out of debt without taking on more debt — makes sense, right?

Filing a Consumer Proposal to Get Out of Debt

In 2018, 70,175 Canadians filed consumer proposals (CPs) as a means for getting out of debt. Rather than file for bankruptcy, a consumer proposal is a form of insolvency where you reach an agreement with your creditors to pay back a portion of your total debts owed. This amount is determined by your income and assets. However, unlike bankruptcy, when you file a consumer proposal you can keep your assets, which again is especially important for homeowners and anyone else with significant investments. A consumer proposal can last up to 60 months and stays on your credit report for 3 years after being discharged. Because consumer proposals are a form of insolvency, only a Licensed Insolvency Trustee (LIT), like MNP LTD., can file a consumer proposal on your behalf.

Filing for Bankruptcy to Resolve Your Debts

For some people, filing for bankruptcy is their best solution in order to move forward. In 2018, over 55,000 Canadians filed for personal bankruptcy. To file for bankruptcy, you must work with an experienced LIT who will negotiate the terms of the agreement with your creditors. Only Licensed Insolvency Trustees or LITs can administer government-regulated insolvency proceedings, such as consumer proposals and bankruptcies.

Contact Credit Canada To Discuss Your Quiz Results and Debt Relief Options

If you’ve taken our quiz and have questions about getting out of debt (most people do) give us a call at 1.800.267.2272. We can book you a free counselling session with one of our certified Credit Counsellors who can help you make sense of your quiz results and provide next steps.

Our Counsellors can also give you money management advice specific to you and your goals. This includes how to get out of debt when you have limited funds and/or bad credit. Our not-for-profit counselling services are completely free and confidential, so you have nothing to lose! Contact us today for a free debt assessment.

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