Falling into credit card debt is something that happens to many Canadians. The rising cost of living and unexpected expenses can make it difficult to pay your bills – but it doesn't mean you should feel trapped with no way out. If you find that it's getting difficult to get the help you need, here are steps you can take to consolidate your unsecured credit card debt.
Step 1: Evaluate Your Debt and Know Your Options
First of all, it’s important to understand what caused you to run into credit card debt trouble in the first place. In many cases, it's typically due to high-interest rates on credit cards. If you rack up a high balance that you can't pay off in full at the due date (or at least the majority of it), you'll fall into an endless cycle of debt that just continues to grow, and insufficient funds to get back on track.
It's no secret that credit card debt can happen for a variety of reasons: from car trouble, dental bills, or other unexpected expenses that crop up. The important thing to realize is that you're not alone – in fact, thousands of others are in your same situation. Even if it seems like you've lost control of your finances, you must understand that there are ways you can make better, more informed financial decisions about your credit card debt.
How to Evaluate Your Debt
- Take a close look at your monthly bills and expenses
- Ask yourself if you're able to make all of your payments, and if not, why not?
- Look at minimum payment options (after all, paying something on time is better for your credit than nothing at all!)
Even if you don’t have extra funds to pay off the debt yourself, you still have options. You may be able to consolidate your credit card debt through a debt consolidation loan, which will be like a brand new start with a more affordable interest rate. But make sure you understand rights and responsibilities regarding credit and loans. You will need to read all the terms and conditions of any loan agreements before you sign.
Keep in mind that it's best to avoid a debt consolidation loan if the cumulative amount of your debt means it's just going to raise your interest rate even more than before. For example, if you have credit cards that all have an interest rate of 15-20%, you'll want to be sure your debt consolidation loan has an interest rate of 19% or less in order for it to be worth your while, so you can take control of your debt and pay it off.
Tip: Not everyone qualifies for a debt consolidation loan. Your credit score, credit rating and credit history will impact your ability to get a consolidation loan.
Step 2: Consider A Debt Consolidation Program
A Debt Consolidation Program or DCP involves combining all of your unsecured debt so that you'll only have to make one monthly payment until the debt is paid off. In order to consolidate your outstanding unsecured credit card debt, you'll need to work with financial experts, like a certified Credit Counsellor who has dealt with hundreds of others in your situation. It may be in your best interest to pursue this option if you can't get anywhere with your bank – as they require good credit in order to accept your debt consolidation loan application.
How a Credit Counsellor can Help You Become Debt-Free
Part of a certified Credit Counsellor's job is to help you develop a budget and spending plan that allows you to pay off your debt comfortably over a set period of time, while still taking care of all your everyday expenses. This usually involves negotiating with your creditors to either stop or significantly reduce the interest on your debt. Once you make the move to consolidate all of your credit card debt, you just need to follow through with the one monthly payment, which gets dispersed to all of your creditors. The Counsellor will be able to answer your questions about debt and provide you with the right tools to help bring you peace of mind and maintain financial wellness.
While debt consolidation is a viable option for many, it's important to discern between reputable companies and the not-so-reputable ones often advertising on TV. Beware of these companies, especially those claiming they are backed by the government. In most cases, if not all, this is not true. Many will also charge you exorbitant interest, which will further perpetuate the financial hole and not help make anything better. That’s why it’s important to do your research of any company or organization you are considering working with. Reputable organizations will be happy to answer any of your questions clearly and directly, so you know exactly what you're getting into.
Step 3: Create a Plan That Works
As a non-profit organization that's been helping Canadians for over fifty years, Credit Canada has certified Credit Counsellors who understand all types of debt and can find a solution that will allow you to make affordable payments. The Counsellor will also be able to provide advice and helpful money-saving tips that will steer you away from debt in the future.
Every debtor has their own unique circumstances, which is why our highly trained Credit Counsellors craft a customized plan for each individual. It's possible to pay off credit card debt faster than you might think, as long as you make the commitment. Once you pay off your debt you will be able to build a stronger foundation for handling money decisions in the future.
Credit Canada can help you pay off your debt
If you haven't found the right path to help you solve your debt problems on your own, contact Credit Canada to learn more about freeing yourself from debt. We can help you with a free Debt Assessment and show you what your options are moving forward. All of our counselling is free and confidential.