Budgeting

Really, everyone should have a budget, and budgeting is especially important if you’re going further into debt. Comparing your income to your expenditure will give you a better idea of the magnitude of the task ahead of you, and categorising your spending will help you to identify the areas that can be cut back. Remember to include debt repayments in your expenditure, and try to make them a priority. Burying your head in the sand will only make the problem worse as debts continue to pile up. When dealing with debt, be proactive.

Building a solid budget should be your very first step in trying to reduce your indebtedness, because it won’t damage your finances and will continue to be useful even once all of your debts are repayed. With that said, though, budgeting may not be a complete solution to your debt problems. If you’re already deep into debt, repayments may be high enough that you can’t budget around them without unreasonable cuts in expenditure elsewhere. You can cut out spending money and live frugally, but you’ll still need food to eat and a place to sleep.

Negotiate and Revise

Debt repayments are negotiable. If your debt repayment schedule becomes unmanageable, contact your creditors and ask them to revise it. Making lower payments over a longer period of time might give you the breathing room you need in order to avoid running further into debt. It will also make it much easier to fix your budget. It might come as a surprise, but creditors are usually willing to make at least some accommodations. After all, if you default, they get nothing, whereas if you revise your schedule it just takes them longer to get their money back. In any case, the worst they can do is say no. While this is less likely to work, you can also offer a debt settlement: a one-time payment for part of your debt’s value that will write off your debt entirely. Working with a credit counselling service is more likely to be successful than calling up your creditors yourself, but they might be willing to negotiate if they think that the alternative is not getting their money back at all.

Alternatively, you can alter your payment schedule by applying for a debt consolidation loan. A bank or other financial institution will pay off your debts for you, and then treat that repayment as a loan to you on which you will pay interest. If you have several different creditors, keeping track of each individual repayment schedule can be very difficult. Debt consolidation turns all of that into one big loan, and it can cut your interest rates significantly as well. However, if your credit rating has already been damaged by your debt, you may not be able to make use of this option. Once again, though, the worst that they can do is say no, so ask around and see what different banks are willing to offer you.

Seek Professional Help

Credit counselling services are available all over Canada. Organisations like Credit Counselling Canada and the Credit Counselling Society offer free advice and personalised counselling services to people trying to manage their debt. Dealing with debt is complex and there are many different ways to reduce your indebtedness or consolidate your debts, so expert, tailored advice is invaluable. To talk to a credit counsellor, go through one of the websites linked, look up a local credit counselling body such as the Ontario Association of Credit Counselling Services, or ask for a referral at any member store of the Canadian Payday Loan Association. As with budgeting, be proactive. If you are struggling with debt, don’t wait until it gets worse. Seek professional help immediately.