How to pay off debt while living paycheque to paycheque

A new poll from the Canadian Payroll Association found that just under half of Canadians are living paycheque to paycheque, with one-quarter holding less than $2,000 in emergency savings. In certain parts of the country, those numbers are much higher—54 per cent of Manitobans are living cheque to cheque, compared to 48 per cent nationally. In Atlantic Canada, 59 per cent live from one cheque to the next, and one-third would have trouble coming up with $2,000 in an emergency. Many of these Canadians are unable to save regularly, and nearly four out of 10 say they’re overwhelmed by debt. And while mortgages are the most common form of debt held by Canadians, 22 per cent say that their credit card debt is the most difficult to pay off.

These numbers are clearly a concern. Without the ability to save, Canadians could struggle to meet their income needs and pay off debt in retirement. To wit, 11 per cent of Canadians believe they’ll never be debt-free. But if credit card debt is the biggest concern, there are ways to pay off debt while reducing interest and even the total amount owed. This blog will examine two of the most popular methods.

Consolidate credit card debt with a consolidation loan

A debt or credit consolidation loan can help you pay off multiple credit card debts in one monthly payment. This debt relief option allows you to combine multiple debts into one loan, which is usually offered by your bank or financial service provider. It might help to shop around to see which bank can offer you the best rate on a debt consolidation loan; in any case, you’ll want to ensure that you’re paying a lower interest rate on the loan than you were on your credit cards.

Once the bank has consolidated your credit card debt, you’ll also want to cut up or freeze any cards that are being paid off by the loan. This way, you won’t be taking on more credit card debt while paying off your credit consolidation loan.

A consumer proposal can combine and reduce credit card debt

Another form of debt relief, offered by a Licensed Insolvency Trustee (LIT), is a consumer proposal. If you have more than $5,000 in consumer debt, and can repay at least a portion of your debts, this could be the best solution for you. A consumer proposal stops all interest charges and combines multiple debts into one monthly payment. The LIT will negotiate with your creditors to consolidate your debts, and can potentially reduce the amount that you will have to repay.

While a consumer proposal will affect your credit report, it can also give you a fresh start financially by offering a concrete plan to pay off your debt in five years or less. An LIT will explain all the debt relief options available to help find the best solution that’s right for your situation, whether it’s a debt consolidation loan, consumer proposal, or advice about your budget. In any case, there are professional solutions that can help you pay off debt on your current paycheque.

What do you think of the survey results? Join the conversation on Twitter using the hashtags #BDOdebtrelief #LetsTalkDebt