Most Canadians carry a credit card or two, and this in and of itself is not a problem. Credit cards offer convenience and flexibility, and used correctly, can help you build a good credit rating as well.
Unfortunately though, not everyone is in the black with their credit card statements. If you are someone who carries a large amount of debt on your cards, or carries a balance on many different cards, you are not alone. The number of people who are just paying their minimum payments (or are not making them at all) is astounding. The question, then, is how to dig out of credit card debt and get your finances in check. Financial stability is possible with some careful planning and sound advice:
- Prepare a detailed budget. Include everything from your morning latte to your nightly yoga class, and everything in between. Making sure to include all of your expenses, even those we may perceive as insignificant, helps to get a complete picture of where your money is going. Once you have it all recorded, see if you can make any changes to free up some expendable cash to put towards your credit card bills. Cutting back on some extras now means a better credit score, less stress and more options when it comes to loans and mortgages down the road.
- Apply for a Debt Consolidation Loan. Debtors whose credit rating is still in good shape can often be approved for a low interest consolidation loan. Rolling all of your debt into one monthly loan payment can be a life saver for those who are just at their tipping point with cash flow. Most institutions will insist that your other accounts are all closed as soon as they fund the loan, so you won’t find yourself over extended again later on.
- Consider Credit Counselling. If you find that getting your budget in order is more challenging than you thought, consider meeting with a qualified Credit Counsellor. They know the questions to ask, and have the tools to help you develop a realistic financial plan that will work for you long term.
- Talk to a Licensed Insolvency Trustee. If you’ve tweaked your budget and still can’t seem to get a handle on your credit card bills, your debt load is likely far too high for you to carry. A Licensed Insolvency Trustee can work with your creditors to arrange a consumer proposal, allowing you to pay down your debts at a rate you can afford without incurring further penalty from your lenders. As a last resort, you may be advised that bankruptcy is your best option to eliminate your excess debt and begin rebuilding your financial future.