As of December 2016, Canadians owed $569 billion in consumer dept (things like credit cards and lines of credit) which does NOT include mortgages. Debt can become overwhelming and hard to manage, 46% of Canadians carry balances on the credit cards each month (meaning they don’t pay them off each month and therefore pay interest).
Believe it or not, you can get beyond your debt. If you are hoping to purchase a home in the future, you certainly want to tackle your debt and there are ways to help boost your credit score while you’re at it (you can check your credit score for free online, Google it). Here are four ways to work on that magic number:
- Always pay more than the minimum payments on your credit cards and line of credit.
- NEVER, ever be late.
- Be sure to always have available credit, in other words don’t max out your credit cards or line of credit.
- DO NOT skip payments on cell phone, vehicles and whatever other bills you have.
So now that you have found out what your credit score is and you are working on raising the numbers, here are some ideas to get that debt under control so that you can get on track for your new home.
Found some money? Don’t celebrate, pay debt.
I don’t mean the loony you found in between the cushions of the couch, I mean you received an income tax refund, a bonus at work, someone gave you a gift or you were able to save money by making your coffee every morning instead of swinging by the coffee shop. Although very tempting to treat yourself to something, remember your long term goal is to get that home. Now put that money on your debt. Which debt has the highest interest rate? Pay that down first.
Write out a budget
Sound too simple? Do it anyway. Go through the last 3 months and make yourself a budget of what was spent and where, break that into categories. Now make yourself a reasonable, balanced budget and be sure to allocate money towards debt payments. Hopefully you also have a savings category. Remember, you will need a downpayment for that new home.
Get a part time job
You would be surprised how many people find a part time gig to supplement their income. In our area there are many jobs that are seasonal, part time, entry level and perfect to help supplement your income. The temptation will be to take some of that money and go out for supper or splurge on that special item as a reward for working hard, putting in long hours, being away from home more but remember why you are doing this. Put that money directly on your debt and think of the pay off when you purchase your new home.
Is it time to consolidate?
Your debt can be so overwhelming that even with the ideas listed above, you just can’t seem to see the light at the end of the tunnel. Why not speak to someone at your financial institution about a consolidation loan? A consolidation loan is a loan to that essentially combines the credit cards, line of credit, vehicle loan and/or whatever else you negotiate and then you make your payments to the financial institution instead of the credit card companies and the line of credit and the company that financed your vehicle and, and,…well you get the idea. Often, the consolidation loan is at a lower rate of interest than you would be paying on your credit cards and some other places that have given you credit.
While you are at your financial institution, ask their advice on which products they have available to help you reach your goal of reducing and getting out of debt. Let them know if your goal is to purchase a home. They may have just the thing to help you.
Once you’ve done all these things (or even before), come and speak to us about buying a home. North Bay Property Shop would love to help you find just the right home!