Canadian household debt has hit a staggering $1.8 trillion (this amounts to $22,837 per person, not including mortgages). Having debt can feel overwhelming, and figuring a way out of it can be even more confusing. Where do you begin? There are percentage rates, minimum payments, and all sorts of other number-related things that may make you want to just bury your head in a pillow. But there is hope—and help!
Here at Credit Canada we’ve created a Debt Calculator to help you make sense of your individual situation. (If you’ve seen or used our calculator before, we’re pleased to say that we’ve given it a makeover, making it even more informative and user-friendly.)
So how does it work?
First, the calculator needs some information to work its magic, so you’ll need to gather your credit card bills or gain access to your statements online. With this information on-hand, you can plug in the current balance and interest rate for each card into the calculator, up to a maximum of five credit cards.
Once you’ve added your credit card debt info, you can either input your monthly fixed payment yourself (which is the amount of money you can put towards paying all of your credit cards every single month) or the calculator will automatically calculate it for you as your minimum monthly payment.
Now, hit the Calculate Your Savings button. This is where things get interesting!
The first thing you’ll see is a table that shows you what your monthly payment would be using different payment strategies—minimum monthly payment, fixed monthly payment using the snowball method, fixed monthly payment using the avalanche method, a consolidation loan or a Debt Consolidation Program. It also shows you how many months it would take to pay off all of your debts and how much you’ll pay in interest, which can be a real eye-opener.
And just to make things super clear, below the table you will see a graph that plots out how long it will take you to be debt-free using the different payment strategies.
The big gain here is that the Debt Calculator compares how taking different approaches to debt repayment, such as just making the minimum payments or making fixed payments using the snowball or avalanche method, can impact how much you save in interest. But what are those methods, anyway?
The snowball method of debt repayment involves paying as much money as possible toward your smallest debt, regardless of the interest rate, while maintaining just the minimum payments on your other debts. Once the smallest debt has been paid off, you roll the money you were paying towards that debt into your next smallest debt. And once that one is paid off, you roll that money onto the next one, and so on. This method accelerates the mental reward you get from seeing debts go to zero, which can help motivate you on your quest for debt freedom.
The avalanche method of debt repayment, also known as debt stacking, involves maintaining the minimum on all of your debts, but paying the most money you can towards the debt with the highest interest rate first, regardless of how much money is owed. While it might take longer to eliminate your first debt based on how high the balance is, in the long-run you're likely to save hundreds, if not thousands of dollars in interest charges.
(You can learn more about both methods, the pros and cons of each, and see actual examples, here).
But that’s not all.
The Debt Calculator will also show you how much time and money you could save by paying off your debts through a Debt Consolidation Program with Credit Canada. I plugged in some numbers on behalf of a client and found that by doing a Debt Consolidation Program, their minimum payments dropped by over $60 per month while bringing their payout time from a staggering 257 months to just 48! That’s a difference of over 21 years to be debt-free versus just four. (Many of our clients have been able to complete the program within three years.) Can you imagine waiting 21 years just to rebuild your credit, buy a home, or get a new car? I know can’t.
Our new Debt Calculator is a free tool anyone can use to help prioritize their money and debt payments, so they can achieve their financial goals on their own terms and timelines. It’s about getting all of the information you need to make the best decision for you. And if a Debt Consolidation Program seems like it can be the right choice, it doesn’t hurt to get more info. Contact us and we’ll be happy to answer any questions you might have before you make any kind of decision.
As a non-profit and registered charity, our agency has been helping people get rid of their debt and avoid bankruptcy for over 50 years. You can use our free Debt Calculator to get a clear picture of where you stand with your debt, and if you need any help or want some unbiased, professional advice, our awesome credit counsellors are available for free counselling sessions—that’s right, they’re completely free, plus 100% confidential and non-judgmental.