5 ways to take control of your debt

November 27, 2014

Know your options and take control of your debt. From understanding your debt to considering available options, find the right solution with these helpful tips.

5 ways to take control of your debt

Understanding your debt

Managing debt starts with understanding what your financial situation is, including your income, expenses, assets and debts.

  • You’ll need to find out the total amount of your debt, as well as the individual amounts you owe to each creditor.
  • By looking at your cash inflow and expenses and considering how much you owe, you’ll be able to start drawing out a plan and making a budget to get rid of your debt.

Early warning signs

If you’re just starting to notice the early warning signs, such as spending more than you earn and creditors pressuring you to make payments, finding local non-profit credit counseling sessions or personal finance workshops could be all the help you need.

  • If your debt is more considerable, taking drastic action may be required.

1. Negotiating payment plans with your creditors

The first step any debtor should take is to contact creditors that have been trying to collect from you to see if they are at flexible in terms of the dates and amounts of your payments.

  • This will require taking a look at your budget and cash flow, and negotiating payments with your creditors that will work with your budget.
  • You may also be able to negotiate a lower interest rate.

2 . Consolidating debt

You may want to consider consolidating your debts with a financial institution.

  • When you consolidate your debts, you’ll end up with just one, to be paid out to the financial institution your agreement is with.
  • You should not accept a consolidation agreement from a lender offering you an interest rate that is higher than the interest rates of your individual debts.
  • Having only one creditor simplifies your finances by lumping all your payments into one. It’s also a great way to lower your interest payments.

3. Registering for a consolidation order or voluntary deposit

This is when you ask your local court to take a certain amount of your income on a monthly or bi-weekly basis to repay your creditors for you.

  • When you register, you make a written statement under oath declaring your financial situation and obligations.
  • This solution protects your assets. Payments to the court stop only when all of your debts have been repaid.

4. Making a consumer proposal

A consumer proposal is a document that is filed by a bankruptcy clerk.

  • They will negotiate with your creditors on your behalf in order to reduce your debt and set up a payment plan that can extend up to five years.

5. Filing for bankruptcy

Your last resort will be filing for bankruptcy.

  • It’s the process that absolves the debtor from payment, but that requires the liquidation of assets to repay creditors. Assets include property and capital.

Managing your debt efficiently and effectively

Now that you have an overview of potential debt solutions, consider your course of action and which kind of professional might be best suited to help you manage your debt efficiently and effectively.

The material on this website is provided for entertainment, informational and educational purposes only and should never act as a substitute to the advice of an applicable professional. Use of this website is subject to our terms of use and privacy policy.
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