Now you can listen to our blog post, "How to Get a Farm Mortgage in…
Now you can listen to our blog, “6 Steps to Get Out of Debt That Actually Works” while on the go.
Do you find yourself paying bills late, bouncing checks, or getting calls from collection agencies on a regular basis? These are all symptoms that your debt is getting out of hand.
The good news is that there are steps you can take to regain control of your finances.
This article is designed to assist you in developing a strategy for gaining control of and managing your debt. It includes critical stages to take, as well as recommendations and access to additional information and tools that will assist you along the road.
The most crucial step in gaining financial control is to create a budget. A budget is a financial blueprint that shows you how much money you have, where it comes from, and where it needs to go.
To begin creating a budget, figure out how much money you have coming in and how much money you have gone out. Make a list of all of your bills and debts, including loans, credit cards, and lines of credit. All living expenses, such as your mortgage (or rent), utilities, groceries, and insurance, should be included in your budget. Include as much information as possible.
The Financial Consumer Agency of Canada has a budget planner that can assist you in getting started.
Step 2: Examine your credit report
Your credit report and credit score are two of the most important factors that lenders use when deciding whether or not you are an acceptable candidate for credit. Lenders want to know if you’ll be able to keep up with your payments.
Your credit score fluctuates depending on the information in your credit report. Making regular, on-time payments, for example, will progressively raise your score, whereas skipping payments will lower it. Credit scores in Canada range from 300 to 900. A score of 600 or more is considered good. Generally, scores of 750 and up are regarded as outstanding.
You may be able to borrow money at a cheaper interest rate and pay less interest over time if you have an excellent credit score. A bad credit score can make it difficult to qualify for loans, credit cards, leases, or mortgages, and it can also lead to higher interest rates. Your credit history may also have an impact on your ability to qualify for some debt repayment choices.
Take the time to review your credit report on a regular basis. Examine your credit report to ensure that it is free of inaccuracies. Your credit score will not be affected by reviewing your personal credit report. You have the right to know what information is on your credit report and can obtain a free copy of it.
It takes time to improve your credit score, but there are steps you can take now, such as utilizing a secured credit card and making sure you pay all of your minimum monthly payments. More information on how to enhance your credit can be found at the Financial Consumer Agency of Canada.
Step 3: Make a strategy
Not sure where to start when it comes to getting your debt under control? You can utilize a variety of techniques to manage your debt and begin paying it off.
One strategy is to pay off the loan with the highest interest rate first. As a result, you’ll pay less interest over time and pay off your loan faster. Another option is to begin paying off the loan with the smallest balance first. Getting a few debts paid off quickly will help you gain momentum and encourage you to keep going.
If you’re not sure where to begin, schedule an appointment with a budget or credit counselor. They can assist you in identifying debt management options and developing a debt reduction plan. Consider the following scenario:
- Is it possible to consolidate your debts (also known as debt pooling)?
- Are you able to work out a payment plan with your creditors and/or lenders?
- Are you collaborating with your mortgage lender to identify the most cost-effective options for your budget?
- What attitude should you adopt when it comes to credit cards?
- Remember that seeking help is not anything to be ashamed of or afraid of. A counselor will work with you to get you back on track and in charge of your finances or find another solution.
Do your homework! There are some shady businesses out there that may try to entice you with claims to help you get out of debt and solve your financial difficulties. Learn about your rights and contact your provincial regulator for more information on debt management options.
Here are some sites for locating a reputable budget advisor and learning how to deal with debt consolidation:
- Getting advice from a credit counselor – Canada’s Financial Consumer Agency
- Canada’s Credit Counseling Service
- The Canadian Association of Credit Counselling Services
- (CACCS) is a non-profit organization that
(Only in French) Coalition des associations de consommateurs du Québec – Consumer organizations that provide financial counseling to Québec inhabitants
- The Financial Consumer Agency of Canada recommends using a debt settlement company.
Step 4: Take command of the situation and act
It’s time to put your budget and strategy into action now that you’ve spent the effort to build them.
Stick to your strategy and be consistent, whether you made your own plan or are working with a credit counselor. Try to pay the bare minimum on all of your debts by the due date. Any extra money you have from your budget can then be used to pay off your target debt.
However, keep your expectations in check. If you are unable to make the payments outlined in your plan, you may want to look into other options. This is a good opportunity to enlist the help of a professional if you haven’t already.
Remember that, depending on your circumstances, sticking to your plan may not always be achievable. The goal is to try to get a handle on your debt before it gets out of hand.
Here are some more debt-repayment sites and tools:
- Getting yourself out of debt – Canadian Financial Consumer Agency
- Calculator for Credit Card Payments – Financial Consumer Agency of Canada
- Companies that recover debts
Step 5: Make the most of your money
When you follow a strict debt management plan, you may find yourself scrambling to stretch every dollar.
It is critical to examine your spending carefully in order to determine where you might save money.
Take a look at your budget first.
Are there any minor steps you can take to save money and reduce recurring expenses?
Simple solutions include meal planning for the week to save money on food, commute planning to save time and money on gas, and lowering your thermostat to save money on your energy bill.
Take a look at your fixed expenses next.
Many Canadians are house poor, paying far too much for living expenditures such as their mortgage, insurance, utilities, and other necessities.
As a result, you won’t be able to satisfy your other financial obligations.
You may not always be able to prevent yourself from becoming house poor, but you may try to cut down on some of the costs.
If you’re having difficulties paying your mortgage, talk to your lender and try to figure out a solution together.
Examine your insurance plans and compare rates; you might be able to negotiate a lower rate with your broker or find a better bargain elsewhere.
Similarly, you might be able to get a better deal on services like phones, television, or the Internet.
Over the course of a year, lowering those monthly payments might save you money.
Step 6: Make a plan ahead of time
You must maintain an eye on the future once you’ve established a budget and a debt management strategy.
While your budget will most likely contain savings and emergency funds, you should always budget for larger purchases like a car, household goods, or even a new home. Before you make a financial commitment, plan and analyze these purchases to ensure that you know what you can genuinely afford. For example, there may be other charges to consider in addition to a vehicle’s loan payments or your home’s mortgage payments. These expenses can quickly build up and put a burden on your finances.
Here are some extra resources to assist you in becoming more frugal with your money.
- Calculators for Buying a House | Canadian Mortgage and Housing Corporation
- Calculator for Driving Costs When Buying a House – Canadian Automobile Association
- Purchasing or leasing a car
The Bottom Line
At Lionsgate, we specialize in helping people obtain funding private mortgages for land purchases as well as for other real estate transactions. If you are looking to buy land in Canada, get a mortgage or apply for a loan, leave us a message and we will try to connect you with local realtors and sourcing for financing.
If you found this article helpful, please share it with someone you care about. Also, visit our blog to read similar articles on mortgages.