That’s right. Having the funds to pay off your debt is important. However, there are other more important components you need to understand so you can effectively pay off your debt. In fact, you can even save yourself money in the process. 

What do you need, aside from money, to eliminate your debt? 

You need an understanding of your debt. 

Before we jump in, the first thing you need to do is understand your debt. It’s time to put your finances under the microscope and come face-to-face with your debt. Ask yourself the tough questions you’ve been avoiding like:

• Where is your debt coming from?
• How did you get into debt? 
• How much debt do I have in total?

Regardless of how or how much debt you are in, don’t let it overwhelm you. Instead of focusing on what is wrong, think about how you are going to fix the problem. It’s important to do this step before your debt becomes completely unmanageable. The earlier you take action against your debt, the better. Debt isn’t one of those problems that you sweep under the rug and expect to disappear. 

Start by writing down a list of all your debt. Where your debt is coming from, how much you owe, and the minimum payments you make each month. Then, change your perspective. Don’t view your list of debt as something you should avoid and ignore. Make it your primary financial goal to pay it off and eliminate it for good.

You need a budget.

Once you have a deeper understanding of your debt, it’s time to evaluate where your income or rather your money is going. Start by looking at your monthly bank statements and what your money is being spent on. A great way of doing this is by sorting your expenses into a few different categories. For example, yours may look something like this: 

• Debt payments 
• Monthly bills 
• Groceries
• Gifts
• Restaurants 
• Recreational expenses

For each charge on your statement, ask yourself if the purchase was necessary. If you’re calling yourself ‘broke’ after spending your income on nonessential purchases, then you’re not actually broke. 

On average, about 50% of your income should be going towards the necessities. If more than 30% of your income goes towards your ‘wants’ or more recreational purchases, you must create a budget for yourself. You’ll need to carefully review where you are spending your money and how you can cut down on your expenses. Until you can lower your debts, try to keep your nonessential purchases to a minimum and use that money towards your debt instead of buying things you don’t need.

Remember, you’re not just cutting expenses for the heck of it. You’re doing this to free up more money to go towards your debt. Even the smallest budget cuts can add up, so be mindful of how you spend your money. In this case, every penny does count. If you’re deciding between going out for a fancy dinner or making something at home, choose the latter. 

More importantly, you need to stop adding to your debt as well. Seems obvious enough, but it can be harder than you think. If you continually add to your credit card balances, you will never get out of debt. For example, if you have high credit card bills but you continue using your credit cards. Stop using your credit cards where you can and focus on paying down the balances you owe before spending more. 

A great method you can use to help you budget is the 50/30/20 rule. 50% of your expenses should go toward your needs, 30% towards your wants and 20% should go towards paying down your debts. 

You need a plan.

Now that we have an understanding of our debt and we’ve set a budget for ourselves. The next step is to create a plan. No matter how much you owe, how much of an income you have, or how much you have saved, you need to come up with a plan to eliminate your debt. 

One way you can start is by organizing your debts in order of priority. For instance, you can arrange them from the highest to lowest interest rate. Or you can order them from the highest amount owed to the lowest. The plan is to pay off as much as you can afford on one account while paying the minimum on all the other accounts. Overall, you want to make sure that whatever plan you come up with, you are not missing payments, and you’re meeting all your financial obligations without any strain. 

There are many different methods you can use to pay off your debt and get debt relief. Depending on how much debt you owe, your options may vary. You can opt for a debt restructuring plan as well, which you can learn more about by clicking here.

Help you decide

To help you decide what option works best for your specific situation, we have searched out who we believe to be the best companies to help Canadians deal with their debt. How are we qualified to determine this? With over a decade of experience and working with thousands of past clients, we think that we may have some insight.

If the company does not pass our gold standard test, then we will not recommend their services. If you are looking for the best advice on how to consolidate your debt, fill out our contact form, and we will be sure to refer you to a company that we approve of. Let it be clear, we do not mine your data nor sell your information to all kinds of companies. We are simply looking to connect people who are serious about dealing with their debt to a professional who is best suited to help make that happen.

Whatever your debt-free journey looks like, remember to take it one step at a time and that you are not alone. Debt repayment doesn’t happen overnight, but it can happen faster with the support of the right team on your side.

The post What you need to pay off your debt, besides money appeared first on Get Me Debt Free.

There’s a difference between debt deferral and debt forgiveness.

When you decide to defer your payments, they aren’t disappearing. You will eventually have to pay your debts back in one way or another. While you’re deciding if a payment deferral is right for you, consider what will happen after the deferral period is over. In most cases, there will be accumulated interest on the debt you owe, and you could end up paying more in the long run.

Take a mortgage payment deferral, for example. Once your deferral period ends, your payments will return as normal. Any interest and payments that have been built up over the last several months will need to be repaid. Instead of paying that sum upfront, your monthly payments will likely increase to make up for the time you deferred your payments.

Yes, payment deferrals are tempting, but are you (or will you) be financially ready when those payments come back around? Carefully consider what your life will look like when payments resume. Also, ensure you read (and re-read) the terms of any deferral agreement before signing it. Take special note of when your payments are intended to resume, and do what you can to prepare yourself ahead of that date.

What effect will deferring payments have on your credit?

The big question many people have before they defer their payments is, “what will happen to my credit score.” Because deferring payments is not considered a late or missed payment, it should not affect your credit score. Deferring payments is an agreement you and your lender decide upon together. The only way a payment deferral could affect your score is if your lender does not adjust their system to indicate the agreed-upon deferral. However, if things are running smoothly, your credit shouldn’t take a hit.

At Getmedebtfree.ca, however, we believe that credit scores aren’t worth the hype society has built them up to be. Particularly when it comes to consolidating your debt, sometimes taking a temporary hit to your credit score is worth it in the long run.

What can you do if you can’t repay your deferred payments?

Firstly, you are not alone. When this all first started, Canada faced its biggest job losses since the ‘80s. There are thousands of Canadians out there who are still feeling the financial repercussions of the pandemic. If your payments are approaching and you cannot pay them, you will need to contact your creditor/lender to see what options they can provide.

Payment deferrals are not all bad.

A payment deferral could mean the difference between a family having a roof over their head or not. So, if you’ve evaluated your options carefully and a payment deferral is your best option, take it. Just be mindful of the terms of your agreement before you sign anything. Be aware of any changes to your monthly payments after your deferral period is over as well.

Payment deferrals are a far better option than missing payments. Whether it be your mortgage, school loans, or credit card debt, missing any type of payment can result in penalty fees. In far more serious cases, legal action can be taken against you. The bank could even foreclose your home if necessary. If you need to hear it one more time…Deferring payments is a far better option than missing payments.

The bottom line is, if you can make your payments, just pay them. Only use payment deferrals if you are financially struggling to make payments. Just because a lender has offered it to you does not mean you need to take it. It’s not your only option.

Consolidate your debt and review your best options with the right professional

There is no one-size-fits-all when it comes to a solution for those experiencing financial hardships. Whether you’re trying to decide if a deferral program is your best option or if you’re worried about payments starting back up again, with our industry knowledge and years of experience at GetMeDebtFree, we can at least point you in the right direction. We have done the leg work and searched out who we believe to be some of the best companies in Canada to help people deal with their debt. If the company does not pass our Gold Standard Test, then we will not recommend their services. If you are looking for the best advice on how to consolidate your debt, fill out our contact form, and we will be sure to refer you to a company that we approve of. Let it be clear, we do not mine your data nor sell your information to all kinds of companies. We are simply looking to help connect people who are serious about finding a solution to their debt challenge with people who are best suited to help make that happen. Take that first step to a debt-free future today.

The post What you should know about payment deferral programs & debt appeared first on Get Me Debt Free.