Make a budget and get budget counseling
A basic first step for debt reduction is to prepare a budget and plan your spending. Once you have a budget, you must stick to it. When you follow a budget, you can take any extra money you have each month and put it toward your debts. This will lower your total debt and save you money on interest fees. Don’t spend money on items that are not in your budget. Eventually, if nothing else changes, you will be able to pay off your debts. If you find this hard to do, see a professional budget counsellor for advice on planning a budget.
Combine your debts
A debt consolidation loan is a loan (usually from a bank) that lets you repay your debts to all your creditors at once. This means that you only have one monthly payment, often at a lower interest rate than you are paying now. This saves you money on interest fees and lets you pay off your loan faster.
Contact your creditors
One way to lower your debt is make new arrangements with your creditors. Make a list of your creditors and contact each one with a proposal for one or more of the following:
- Lower monthly payments
- Longer time period to make your payments
- Lower rate of interest
Work with your mortgage lender
The Canada Mortgage and Housing Corporation (CMHC) suggests contact your mortgage lender right away when you run into mortgage problems. You can then work with your lender to find a solution.
Sell a possession
A personal possession is something that you own and do not owe money on. Selling a personal possession can get rid of some of your debt. If you cannot earn more money or cut down your expenses, selling a personal possession can be a good idea.