It’s no secret that Canadians are struggling with high levels of consumer debt. It’s also no secret that the nation’s personal debt problem is particularly pronounced in large cities like Toronto, where the cost of living is high and house prices are skyrocketing.
With Toronto finally starting to emerge from the coronavirus pandemic and the economy stabilizing after more than a year of lock downs, unemployment, and general uncertainty, many in this city will be taking a long, hard look at their finances. Getting on top of debt is going to be a big part of that.
If you want to improve your financial situation and think debt consolidation might be the right first step, here are four tips that can help you navigate the process.
1. Take Out a Secured Debt Consolidation Loan
If you want to consolidate your debt, you’ll need to get a loan to cover the amount of your current total debts, excluding your mortgage.
There are a variety of debt consolidation loans available to Toronto homeowners, but the best way to keep interest payments down is to make sure you borrow against an asset, like your home equity. Second mortgages in Toronto are a reliable way to raise the funds necessary to replace your existing debts without having to settle for a high interest rate or a short repayment schedule.
2. Be Realistic About Payments
One common problem people have when consolidating debt — and dealing with their finances more generally — is a tendency to believe that they can do a one-hundred-and-eighty-degree change overnight.
The reality is that building better financial habits takes time, and it is important to be realistic about what you can manage. Negotiating lower monthly payments on your second mortgage can help give you the breathing room you need to get back on track without falling back into credit card debt.
3. Make a Budget
Budgeting may not be the most exciting thing in the world, but sticking to plan for how much you can spend every week and every month is the only way to get out of debt and stay out of debt in the long term.
If you’ve never made a budget before, it can be difficult to get into the habit, so consider meeting with a financial planner or taking advantage of one of the many budgeting apps available for your smartphone.
4. Stop Using Credit Cards
Credit card debt has long been an issue for Canadian households, and while indicators suggest that overall levels have decreased over the course of the pandemic, it is still a good idea to be vigilant. As Ontario starts to open back up, there will be plenty of temptations to spend beyond your means.
For those who are serious about digging themselves out of debt, it may be a good idea to stop using credit cards altogether for a defined period of time.
The path to debt freedom is not an easy one to walk, and the first steps are always the hardest. But the long-term rewards of getting your debt under control and starting to move your financial life forward are well worth it. Take stock of your various sources of debt, and start exploring your debt consolidation options today — in the long run, you’ll be glad you did.