Debt management is one of the most difficult tasks to handle.  The basic question is which bill should I pay first?

Tax breaks

Most Canadian government-funded student loans allow you to claim the interest payments as a deduction on your annual income taxes.  So you need to decide if the amount of tax benefit (depending on your bracket) is greater than the amount of interest you pay.  If so, this is one that can wait a bit.  However, private student loans are different and may not offer a tax advantage.

Credit Score

Your credit score is the comparison of your balance against the card’s authorized limit.  A good benchmark is that you should not have a balance over 25% of the limit.  If you are planning a major purchase like a home or new vehicle, you will need to have the best credit score possible.  So, you might want to consider significantly paying down or off any credit cards that are over that 25% limit.

Interest Charges

The sooner you can rid yourself of the high-interest rate debt, the better.  It will cost you less in the long run.  You can try to make payments every two weeks rather than just once per month.  If you come into a windfall, you can also make extra payments.  Depending on the loan, you could be penalized for early repayment, so be sure to review the details of your account.

Smaller Balances

It can be a real point of encouragement to completely pay off a loan or card.  In that case, look to the smaller balances because they are easier to pay off.  However, just be sure you don’t resort to using those cards again and get yourself back into the same position you were in to start with.

Debt Consolidation

It might be a good idea to investigate the possibility of a debt consolidation loan.  This is a loan that, when issued, will allow you to use the proceeds to pay off all your other debt.  Then you only have a single monthly payment to be concerned with.  Also, it is possible that after considering the various interest rates, you could be paying less in interest than before.  There are a number of online companies that will give you a ballpark-free quote, or you can speak with a representative of your local bank or credit union.

Dana MacRae Licensed Insolvency Trustee has been helping people manage their debt since 2000. With 10 offices across Southwestern Ontario, it’s easy to schedule an appointment. Just go to www.danatrustee.ca and book your appointment online. We offer video conferencing, or book a home consultation and have the trustee come to you (when allowed by COVID-19 protocols). Contact us today at 1.800.665.9965 or info@danatrustee.ca to learn more about our services and find the financial solution that’s right for you.