Many Canadian homeowners are dealing with household debt these days. Higher costs of living, inflation, and interest rate hikes have all put the pressure on homeowners. As a result, it’s common for people to be experiencing challenges with their financial health and well-being. If you’re dealing with household debt, know that you’re certainly not alone. However, you have options! Here are some solutions you can look into to help you get rid of your household debt.
Consider using a budgeting app
We will start with an easy tip to help you organize your finances. Sometimes, debt is the result of poor organization, late payments, or improper budgeting. In these cases, you may find that using an app can help you stay on top of your financial obligations and reduce the risk of debt. There are several budgeting apps available that are designed to help you manage your money in a way that is personalized for your situation. For example, many apps allow you to connect your bank accounts, automate payments, or create a unique budget based on your specific expenses. This gives you a clear picture of your finances, which improves your ability to make payments on time and make smart decisions with your money. You can check out our list of some of the best budgeting and financial apps here.
Don’t neglect any of your financial obligations
When you have several debts, it’s tempting to just focus on those with the highest interest rates and pay those off first. In theory, clearing out these debts first will reduce the amount of money you will owe long-term. However, this method means putting your other financial obligations at risk. If you completely neglect your other payments in favour of a few larger debts, you are likely to miss payment due dates. This will result in late fees, meaning you will be sinking further into debt. By trying to limit the amount of money you will owe by only tackling high-interest debts, you are actually adding onto your financial obligations. Do your best to always make the minimum payments on all of your debts. This ensures you will not fall behind and owe extra money. While it might be a slower process to clear out some of your debts, it is a safer strategy in terms of avoiding more debt.
Try not to add onto your debts
As a homeowner, you will constantly be coming across new ways to add onto your household debt. There will always be a home renovation to complete, a new vehicle to purchase, or a new credit card to accept. However, if you can, avoid these temptations! It certainly won’t help your current debt situation to add onto it. Things like home renovations can probably wait until you have cleared out some of your existing debts. Once you are in a more stable situation, that is when it might be a good time to take on that kind of project. Of course, sometimes we cannot avoid adding onto our debts. If your car quits on you unexpectedly and you need to purchase a new one, for instance, you will likely have to accept this new debt. The timing doesn’t always work out perfectly when you’re dealing with expenses! However, as long as you do your best to only take on essential debts at this time, you are on the right track.
Is it time to consider a refinance or debt consolidation?
You might be at a point where you’re wondering if you should refinance your mortgage, or look into debt consolidation. Homeowners who choose to refinance often do so to secure a lower interest rate or change their mortgage terms in a way that suits their finances better. Debt consolidation takes this one step further by combining all of your debts into one lump sum. Every month, instead of making several separate payments, you make one large payment with one interest rate. This makes it easier to keep track of your debts. If you have good credit, your single interest rate is often on the lower end as well. This is a longer-term solution for homeowners who are dealing with more complex household debt, so don’t jump right to this option without consulting a professional!
Speak to a mortgage broker
A mortgage broker is the perfect person to talk to if you’re unsure how to proceed with your household debt. We can evaluate your financial situation and your goals to determine the best course of action. If a refinance or debt consolidation look like good options for you, we can help you get those processes started. When you work with a broker, you have a professional on your side to help you find the right product, lender, and anything else to limit your debts. You can put your mind at ease with the confidence that you are making the right decisions.
Household debt can be stressful, but we’re here to find the solution. If you have any questions about your mortgage, get in touch with me!