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Tackling your debt

November 2, 2022
min read

Let’s review what it takes to bring down your debt. We’ve got tips to help you navigate to financial freedom.

Tackle Your Debt: How Much Do You Owe?

If you’re on a mission to get out of debt, it might initially seem like an impossible task. But we know that’s not true! The first and most important step in any debt reduction plan is also the simplest – you have to find out exactly what you owe.

Let’s start there. When you come to a Cambrian Advisor for assistance with debt repayment, we’ll take a look at the whole picture. What do you owe across credit cards and loans or other debts? Some people put off calculating their debt because it feels stressful. We’re here to help with that.

If you’re not sure exactly what you owe, here’s how to start:

Get organized

If your financial records aren’t the tidiest, start by looking through your past mail for monthly statements for credit cards, car loans, and other debts to find your current balances and the interest rates you’re paying. If you’ve thrown some statements away, you may need to call the lenders to get your current balance.

Sign up for Online Banking

With online banking, you can receive your statements via email. This is a convenient way for you to check your balances and a good reminder to stay on track.

Get your Credit Reports

Equifax and Transunion are the two credit bureaus in Canada, and each will provide you a free credit report once per year. These reports will show a list of your outstanding debts, which can help you spot debts you’ve forgotten about (you may spot some mistakes you need to correct with them!). Since different companies may report to different bureaus, it’s best to check both. Between the two reports, you should be able to get a fairly complete list of what you owe.

Make a Checklist

Some types of debt seem to slip people’s minds more often when coming up with a list of their debts. Take a look at this list below. Are there any debts you may have missed when you calculated what you owe?

Credit cards

Personal loans or lines of credit

Payday loans

Car loans

Loans from family or friends

Shop Smarter

Try to buy only what you can afford today. Buy now pay later arrangements can seem like a good deal, but it’s an additional debt that you’re taking on and it requires some financial discipline. Because there’s often a long gap between when you take it home and when you’re obligated to pay, people forget about it and are then hit with all the debt (and interest) at once.

What does it all come to?

When you see your total amount of debt, it can feel overwhelming. But creating this list gives you an idea of what you owe so that you can start the journey to financial freedom. It’s not easy, but paying off your debt will feel like an immense achievement. Meet with a Cambrian Advisor if you’re not sure how to get started. You might save money by consolidating your debt.

One Option: Consolidating your Debt

If you’re in debt, you’re not alone. According to Statistics Canada, Canadians owe $1.83 in debt for every dollar of disposable income that they earn. This debt includes mortgages, car loans, personal loans, and credit card debt. While some debt, such as mortgage debt, can be “good debt”, consumer credit card debt comes with high interest rates, meaning you end up paying much more, in the long run, to pay down your debt.

Personal loans typically come with a much lower interest rate than credit cards and consolidating your debt into a single loan cuts down on the number of bill payments you are required to make per month. Therefore a consolidation loan to consolidate credit cards and other high interest debt can make your life easier by simplifying your payments while saving you money on interest.

A personal consolidation loan can be a good lending option if you want to make sure your payments will stay the same for the entire length of your loan. With a personal loan, you will know your “free-from-debt” date, and once your loan is paid off, you can then redirect those loan payments to your RRSP or TFSA savings or use it to top up your emergency fund.

Considering consolidating your debt? Find out how much you’ll save with a consolidation loan by using Cambrian’s Loan Consolidation Calculator.

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