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.

Regardless of how large your debt is, there is a way out. With debt restructuring, you could eliminate your debt and keep it paid off. As long as you are dedicated and willing to put in the work, you can kiss your financial woes goodbye with a sold debt restructuring strategy. 

What is debt restructuring? 

Simply put, debt restructuring can be considered a proposal you create and made out to your creditors. You offer to repay your debt by renegotiating the terms of your contract that you originally agreed to. When you do this, you’re often paying back a reduced amount on terms that work better for you. 

When you’re overwhelmed with debt, you may need to start picking and choosing which bills to pay. If you have gotten to this point with your finances or you’re struggling to make all your payments, now is the time to consider debt restructuring. Missing payments can lead to additional fees or, in more extreme cases, legal action was taken against you. 

However, if you reach out to your lenders and creditors early on, they may be able to provide you with debt relief options. Many people see their creditors as the enemy. But they will only become the enemy if you stop fulfilling your financial obligations and don’t ask for help.

Regardless of what type of debt you have, you can use a debt restructuring plan to help pay off and eventually eliminate that debt. 

What is the difference between debt restructuring and debt refinancing?

It’s important to note that debt restructuring is not the same as debt refinancing. The big difference between the two is that debt restructuring is renegotiating the terms of an existing contract. Debt refinancing is when you create an entirely new contract with different terms. Debt refinancing is when you pay off or replace your old debt with new debt.  Moving it from basket “A” to basket “B.”

An example of debt refinancing would be using a home equity loan to pay off a credit card. A person may choose to do this because interest rates on a home equity loan are typically much lower than on a credit card. Therefore by debt refinancing, they are able to roll multiple debt payments into one monthly payment to help increase cash flow. However, when you refinance your debt, you often extend the period of time that it will take you to pay off your debts overall which will cost you more interest in the long run. Furthermore, you are taking highly negotiable unsecured debt and securing it against your home while giving up equity. Something to think about.

How does debt restructuring work?

Debt restructuring works by renegotiating the terms of your existing contract with your lender. You do this so you can make it easier for yourself to pay off your debts. 

In fact, it is as easy as this 5 step process: 

1. You reach out to your lender

The first step is usually the hardest. Once you realize that you are unable to meet your financial obligations, you’ll need to start the debt restructuring process. You’ll need to begin by contacting your creditor or lender to explain to them your current financial situation. Your lender may give you options, and usually, debt restructuring is one of them. It’s best to reach out to your lender first before they reach out to you. This shows that you are aware of the issue and are willing to put in the work to fix the problem. 

2. You wait for a response.

A lender is not obligated to give you any help and may not change the terms of your contract. If this is the case and you miss a couple of payments, your account could be sent to collections, or you could be sued for your debt. However, usually, a good first step is to ask for help. It may take some time for your lender to come up with a response, so don’t panic. In the meantime, think of ways to budget your finances more effectively. 

3. You weigh your options. 

If your lender offers you help, you’ll need to weigh out your options. Your lender may offer you temporary hardship assistance or a refinancing plan. You’ll need to review the contracts and consider the pros and cons of each to ensure you’re picking the best option. 

4. You negotiate.

Before you accept an offer, you may be able to negotiate some of the new terms. As an example, you can attempt to get a lower payment amount, have the fees waived, or have the term of your contract increased. 

5. You accept the offer.

Once you and your lender have come to a compromise, you can agree to the new terms of your loan. You’ll do this by formally accepting the terms and signing the agreement. You will then be obligated to comply with the new terms and continue paying off your debt. 

What types of debt restructuring options are there? 

While the process is the same, there are a few different types of debt restructuring strategies you can use to help you pay off your debt. 

These are three main types of debt restructuring: 

Consumer proposal: A consumer proposal is when you follow the formal procedure under the Insolvency Act. An offer is made to pay off the debt interest-free over a period of up to 5 years, and in most cases, the principal amount owing is also reduced. The term tends to be open, meaning if you are able to make additional payments at any time, then your proposal will simply be paid off faster. With a consumer proposal, your assets are fully protected, and no legal action can be taken by your creditors who are included in your proposal.

Informal Proposal: An informal proposal is when your debts are reduced by negotiating directly with your creditors outside of the Bankruptcy and Insolvency Act. Rather than making monthly payments, the agreed-upon payment is made as a lump sum. 

Bankruptcy: This is when your consumer debts are extinguished through filing bankruptcy. Bankruptcy should only ever recommend bankruptcy as a last resort. To learn more about reasons to avoid bankruptcy, click here.

How effective is debt restructuring? 

Throughout the years, we have seen thousands of people create a plan to pay off and eliminate their debt using the power of debt restructuring. Everyone’s battle with debt is different, and not all debt-help companies are cut from the same cloth. How are we qualified to determine this?  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. You have nothing to lose and a lot to gain, so fill out a contact form and take that first step to a debt-free future.

The post What is debt restructuring? appeared first on Get Me Debt Free.