If you have a large debt, it's a good idea to take steps to begin paying it off. Dealing with debt can be especially stressful if your income is not enough to pay off your debts.
Here are a few tips:
- Make an honest budget - calculate how much you spend monthly, and how much your income is (wages, benefits..etc). See if there is any way you can reduce your spending, for example, by eating more at home, and use the extra money to pay off your debts.
- Pay the minimum payment on your all your debts on time. If you do not, you might harm your credit history and credit score. This might make it harder for you to rent or own property, or get loans in the future.
- Try to lower the interest rate on your loans or your credit card. The interest rate is a percentage of your loan that you are charged with by the person lending you money. You can try lowering it by contacting your lenders and/or credit-card companies, and negotiating with them to lower the rate.
- Don't panic and borrow more money. This will only drive you further in debt. Beware of pay-advance services, they can spiral you further into debt with their high-interest payback.
- Negotiate a payback schedule. Talk to your lenders. Try to set a regular payment schedule with them, at a rate that is manageable for you. Be honest about your financial situation and income. Write post-dated cheques or set up an automatic electronic money transfer to make sure you stay on schedule.
- Get help! Many of these steps can be difficult to do by yourself, especially with the stress of paying off a large debt. You can get help with all of these things from a credit counsellor. Find a credit counselling service near you.
Have more than one debt?
Try paying off the loans with the highest interest first, to pay less in interest. Alternatively, you can start paying off the lowest balance - you might feel more inspired to keep paying off your debt if you feel accomplished paying off a small amount.
You can also consolidate your loan by combining all your debt into one big loan. You can do this by contacting your bank to see if this is an option for you.