When used correctly, financing solutions such as credit cards, short-term loans, buy-now-pay later schemes and even mobile phone contracts can be a great way to spread the cost of major purchases and ensure that you get the things you need when you need them.
However, if you’re not careful and don’t keep an eye on your finances, then it’s easy to let debt spiral out of control.
Low interest rates and seemingly attractive financing offers have left Canadians with record debt-to-income ratios, with most households owing $1.80 for every $1 they earn.
This unprecedented situation, combined with rising interest rates, means that many individuals might face serious financial hardship in the not-so-distant future.
Large amounts of personal debt can cause a range of issues for individuals and their families, ranging from issues refinancing through to mental health struggles.
To help, we’ve put together this rough guide to handling increasing debt and dealing with the situation in the right way so that you can get yourself headed towards financial stability and a lower debt-to-income ratio.
Understand Your Options
High levels of debt can make you feel helpless, but it’s important that you remember that you’re not helpless. There are many options and actions you can take. If your debt becomes insurmountable, you could consider bankruptcy as a last resort. If you want to learn more about bankruptcy in Canada, then check out this valuable resource from debt management experts Harris and Partners. Once you understand your options, you’ll feel more confident and able to make informed decisions going forward.
Review Your Current Financial Situation
As well as thinking about what you can do, you also need to review your personal situation. This will help you to stop catastrophizing and understand the nature of your situation. Take the time to check all of your debt and understand when it is due, what interest is being applied to it and how it is affecting your credit score. You can then understand your situation and work out strategies to start resolving the situation or see if bankruptcy might be an approach that you need to consider.
Consider Debt Consolidation
One of the most popular and useful ways to manage and reduce your personal debt is to consolidate it. Consolidating your debt means taking out one loan that will pay off most or all of your other debts. You’ll then only have one creditor to pay, and if you choose the right option, then you might find that you pay off less money in the long run, meaning that your debt will cost you less money. Learn how to consolidate your debt and how this approach could help you to get your finances back on track.
It’s easy to let personal debt spiral out of control, but if you don’t work to understand your financial situation and pay off any loans you might have, then you could quickly find that you’re left facing serious issues. These can range from simply being unable to get more financing to having your home and possessions repossessed. So, you need to make sure that you’re proactive and work towards a solution that works for you and your creditors. These tips should help you to make a start and get you working towards a debt-free life.
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