How to Repay Your Debts Faster

With the rising cost of living and inflation, you may have accumulated debts that you’re now unable to repay. Don’t panic. There are proven strategies for dealing with debt. Here are a few examples.

Some tips on repaying your debts faster :

Use the snowball method or the avalanche method: i.e., start by paying down the lowest-balance accounts or the highest-interest accounts.
Make more frequent payments.
Cut down your expenses: resist impulse buying and cut back on everything you can!
Set up a strict budget and stick to it.
Find additional sources of income (odd jobs, part-time jobs, etc.).
Get a loan to repay your debts. It might make sense to consolidate all your debts. You can talk about it with one of our counsellors.

Several strategies can help you reduce or repay your debts. These two are the best known :

1.

The “snowball” method

As we all know, being drowned in debt often leads to feelings of depression and exhaustion. This method will allow you to gradually bounce back as you eliminate debt after debt fairly quickly. Here’s what you should do :

Make the minimum payment on each of your debts.
Start by paying down the accounts with the lowest balance.
When you’ve settled one debt, tackle the next and so on.

2.

The “avalanche” method

This method is based on repaying debts that carry the highest interest rates. It’s therefore more cost-effective than the previous one. However, the results are often a little slower. So you will need to be patient.

Start by paying down the debt with the highest interest rate (probably your credit card).
Meanwhile, make the minimum payment on your other debts.
Keep following the same logic, focusing on the debt with the highest rate while making the minimum payment on the rest of your debts.

Whichever method you choose, what matters is that you succeed in reducing your debt over time.

Remember that there are good and bad debts. Good debts are an investment for the future (mortgages or student loans) whereas bad debts (credit cards and high-interest lines of credit) are simply . . . debt! For each repayment method, sort the good debts from the bad debts and repay the bad ones first.

In addition to the snowball and avalanche methods, there are other ways to repay your debts faster. Here are the main ones :

Make more frequent payments

When you can, add even a small amount to your regular repayments. For example, use any unexpected income (a bonus, small inheritance, etc.) to reduce your debt rather than spending it on something you can live without.

Cut down your expenses

We often consume more services and products than we need. By cutting out unnecessary expenses and saving money, you’ll recover some funds to repay a bit more of your debts. For example :

Before heading to the grocery store, check the flyers for specials.
Cut back your monthly subscriptions. With warmer weather approaching, you’ll probably be spending less time watching movies on paid online platforms.
Cut down on eating out.
Sell clothes and items you no longer use on online sites like Kijiji and Market Place, or hold a garage sale with the kids. If you need to spend, consider buying second hand instead of new.
And above all, avoid impulse buying! Each time, ask yourself “Do I really need this?” That new pair of shoes or trendy sweater can wait!

Set up a strict budget

As is often said, the best way to get your finances under control is to make a budget. This will allow you to determine how much money you have for your daily expenses and how much you can spend on repaying your debts. Be very disciplined and always stick to your budget.

Online budget

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Find additional sources of income

Many shops are short of staff. Take advantage of this by offering your services and making some extra income! Whether you help out in a restaurant or convenience store, or walk the neighbour’s dog, extra income should not be sneezed at.

Get a loan to repay your debts

It might make sense to combine all your debts into one lower interest rate loan. This is called debt consolidation. It allows you to eliminate higher interest charges, like those on your credit cards, and use the difference to make larger payments that reduce your debts faster.

Develop good habits for the future

By using the above strategies, you’ll gradually reduce your debt. At the same time, you’ll learn good financial habits that will help you stay out of debt. To achieve this :

Review your budget regularly.
Always spend less than you earn.

Taking control of your finances isn’t so hard when you do it one step at a time. And if you’re having trouble setting up repayment strategies or can’t see your way out of debt, call on one of our licensed insolvency trustees. They will be able to advise you—no judgment.

Are your debt problems affecting your life? Don’t hesitate to contact one of our licensed trustees. They will guide you each step of the way.