Debt is usually money borrowed by another party from another – Investopedia. However, it is manageable if you know how to become a better money manager or if you understand the benefits of Ontario debt relief program.
The majority of the population will borrow money once or even more than once in their lifetime. Debt isn’t always bad, especially if you use the money to cover expenses in certain important circumstances like as business capital or for a health emergency.
Debt can be mismanaged too. Most of the people who fall into debt are unable to correctly manage their money and suffer the ill consequences of debt.
There are 2 main types of debts – secured and unsecured.
- Secured Debt – Secured debt is debt backed or secured by a collateral to reduce the risk associated with lending (Investopedia.com). Types of secured debts include:
- Auto Loans
- Unsecured Debt – This is the riskier type of debt. Unsecured debt is a debt for which the creditor does not have a security interest in collateral, and the creditor is therefore not entitled to take property from you to satisfy that debt without a judgment (nfcc.org). Types of unsecured debts are:
- Corporate unsecured debt
- Personal loan
- Consumer durable loan
- Student loan
- Credit card debt
The most common forms of debt are loans, mortgages, auto loans, and personal loans. Loans entail that the borrower will repay the balance of a loan in a specified amount, date, and interest.
Interest as defined by Investopedia is the monetary charge for the privilege of borrowing money, typically expressed as an annual percentage rate (APR). Interest is the amount of money a lender or financial institution receives for lending out money. Interest can also refer to the amount of ownership a stockholder has in a company, usually expressed as a percentage.
It is therefore important that you consider interest rates an important element when borrowing money. The length of time is a very important aspect in determining the interest rate; hence if you plan to pay your debt on a shorter period of time, interest rates are considerably lower.
Another factor affecting the interest rate is the inflation rate – which is practically beyond our control. The amount borrowed is also a factor in identifying the interest rate – so if you borrow a bigger amount of money – it is expected that you will be getting a higher interest rate too.
Liquidity and risk of default are also calculated by the financial institutions when determining the interest rate.
Remember – you can save more money if you pay in a shorter term and pay regularly.
Understanding the basic information about Debt and everything involved in this process is essential to manage it appropriately.
Debt is not entirely bad, especially if used in a beneficial way. Plus if you are able to manage your debt in a very good way – you will be able to write it off faster and you can enjoy big savings too!
There are numerous ways on how to manage your finances overall and be a better money manager. All it takes is discipline and focus on your goal and for sure – you will be financially free in no time.
Tips to Manage Your Finances – Debt Prevention
- Assess – Like in a scientific process assessment is always the first step. Assess your current financial situation. How long will you be able to sustain your daily basic needs if you suddenly lose your job? A day? Week? Month? Or year?. If you have big savings in the bank, no debt, and can even put up some money for investment – then you are doing well and you must keep up your current financial management strategy. However, if you are living paycheck to paycheck, then it’s never too late to plan.
- Plan – Create a budget and a spending plan. List down all your expenses and responsibilities. Take note of your income and how much you can acquire each month. It’s more of looking into the inflow and outflow of your finances. Make sure that you always set aside for savings to help you on the rainy days and prevent you from borrowing money.
- Frugality – being frugal doesn’t mean you don’t spend money at all. It just means that you choose to exclude non-important things, events, and endeavors that will not be helpful in your financial situation. This includes choosing quality over quantity, not spending on things you don’t need, and stopping splurging.
- Never borrow money to buy things you don’t need. One pitfall of many is that they can’t control themselves when they want something to the point of even borrowing money just to acquire it. If you want to be out of debt, never do this.
Tips to Manage Your Finances – Debt Reduction
- Manage your payments – don’t settle with minimum payments. If you can pay more – pay more. It can help you big time with your remaining debt.
- Pay debts with higher interest rates first – of course. If you really can’t pay off your debt all at the same time – choose the one with a higher interest rate so you can save money.
- Look for an additional source of income – If you want to write off your debt faster, find an additional source of income so you can pay more and in a shorter time. You can look for sideline work or sell stuff you don’t use or need anymore.
- Stop using your credit while paying your debt – it’s like adding insult to injury if you keep using your credit. Your debt will not end if you keep adding more.
- Pay smaller debt first – after identifying which debt has a higher interest, now identify which debt is smaller. This is called the snowball method which pays the smallest amount first then you work up to paying your largest debt last.
- Debt relief – if you want to really get some help and things are out of your control, then it’s time to try the Ontario debt relief program. This program is mostly applicable to individuals with over 10K or more worth of debt. You can reduce your debt by up to 75%. The process is easy, fast, and convenient as it is available online. All you need to do is to have a FREE consultation with a Senior Finance Counselor who will assess your situation and find a workable solution. The best thing about this program is that you have the option to write off your debt and get big savings!
If you are interested in enrolling in an Ontario debt relief program – then don’t waste your time! It’s time to be debt-free! Get a free consultation with no obligation.
Benefits of Ontario Debt Relief Program
- Lower your monthly payments
- Pay off debts faster
- Reduce your interest rates
- Manage your finances better
“Statistics Canada reported in late 2020 that the average Canadian household now owes $1.71 for every dollar of disposable income. That’s a sobering debt to income ratio statistic.” – Olympia Benefits
There has to be a solution to this. Take advantage of this new government-approved Ontario debt relief program and take your first step to financial freedom!