How can I settle my debts effectively?

Debt can be a real source of daily stress when it prevents you from using your money for essential expenses. But getting into debt doesn't have to be inevitable, as there are many ways of getting out of it.

Here are some ways to get rid of your debts as quickly as possible:

1. Optimising your budget

The first solution is to draw up a monthly budget covering all your household expenditure. This budget will enable you to eliminate unnecessary expenditure and avoid increasing existing consumer debt. A large proportion of debt can be reduced by cutting back on non-essential day-to-day spending.

Carefully monitoring the flow of your expenditure and income each month is the best way of achieving your financial goals. Budget planners exist to help you set up this budget and stick to it. Bear in mind that this method of budgeting is both a way of paying off existing debts and a way of avoiding future debts by carefully monitoring your income and expenditure.

2. Give priority to settling high-interest debts

Secondly, paying off debts with the highest interest rates quickly will save you money. In fact, this solution will help you limit your interest charges so that you can regain financial stability, which will ease the pressure on your day-to-day life.

Nevertheless, it is important not to neglect debts with lower interest rates by making the minimum repayments before the due date, always with the aim of minimising costs. A second option is to pay off the debts with the lowest balances quickly, in order to reduce their number and gain clarity over your financial situation.

3. Consolidate your debts

Debt consolidation makes financial management much easier, because it reduces the number of creditors. This solution requires a good enough credit record to win the confidence of a lending institution.

By borrowing an amount sufficient to cover your existing debts from a financial institution, all you have to do is repay the institution periodically, usually at a much lower interest rate than that on your debts. Consolidation saves you time and money. What's more, repaying this bank loan on time and on each instalment will guarantee the stability of your credit rating.

4. Present a consumer proposal

A consumer proposal, which is sometimes overlooked, can be a very effective way of settling debts. With a consumer proposal, you can offer to pay off your debts in instalments, interest-free, over a maximum period of five years. This is a recommended solution when your income is high enough for you to make payments to your creditors, even after your day-to-day expenses. The services of a licensed insolvency trustee are required to file a consumer proposal.

Before embarking on this procedure, our qualified advisers will be able to assess whether the consumer proposal is optimal for your current situation.

5. Declaring personal bankruptcy

Personal bankruptcy involves calling on a licensed insolvency trustee to take care of your debts. This is also known as an assignment of assets. In most cases, this solution allows you to keep your key assets, such as your house, your car, your RRSPs and especially your furniture. This option is preferred when your income is insufficient to repay your debts within the time limit. It should be noted, however, that some types of debt will survive or will not be eligible for repayment from a personal bankruptcy.

When this option is chosen, our firm can support you throughout the process to optimise the filing of your personal bankruptcy in the event of insolvency.

With all these methods, paying off your debts is no longer an insurmountable task. It's a process that requires good budgeting and a sense of priorities. It's important not to hesitate to find out about the solutions available from professionals in the field, in order to stabilise your financial situation. Budget planning plays a major role in achieving this balance, and all individuals are strongly advised to use it, regardless of their solvency.

Mallette and its team of experts can help you achieve your financial goals. Don't hesitate to contact us!