7 tips for paying off debt

7 tips for paying off debt


Credit card, line, car loan, student loan… Have you set yourself the goal of paying off your debts? Here are some tips that might help you reach your goal and possibly faster.
1. Make a budget

"The first step in regaining control of your finances and paying off your debts is to make a good budget," admits Vanessa Houghton, senior advisor at National Bank.

Why ? Because by putting your cash inflows and monthly expenses into a budget grid, you'll be able to more easily see how much money you can free up to pay off your debts. “As you budget, you might discover other expenses that you can reduce as well,” adds Vanessa Houghton.

Sometimes you just have to rack your $ 20 pizza deliveries every Friday night to realize it's $ 80 or more a month and over $ 1,000 a year.

There are other tools that can help you get a better picture of your financial situation. For example, National Bank's account aggregator allows you to have a "360 view" of all your accounts in My Online Banking, even those held with other banks in Canada and the United States.

The mobile app also categorizes your spending and purchases. You will be able to see at a glance which are your most important budget items and cut if necessary.
2. Make a list of all your debts

To repay your debts, you must first of all know them well. Make a list of all your debts, including their amount, but also the interest rate you pay on each amount.

With different interest rates, two similar debts might not actually be equal. Yes, a debt of $ 1000 is greater than a debt of $ 500. But owing $ 500 on a credit card and $ 500 on a student loan isn't worth the same. The two do not have the same interest rate.
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3. Prioritize the payment of your debts

Yes, paying off some of your debts should be prioritized over others. How to choose ? It's simple. “The debts with the highest interest rates should be paid off first. Usually, these are the ones that cost you the most. "

At the bottom of your list should be your debts with very low interest rates, such as your student loan, which you should not neglect to pay off. “With the student loan, the interest turns into a tax credit, the rates are low, and you have a six-month grace period after you finish your studies. Yes, it's still debt, but if you have other debts to pay off, focus on the others, while still meeting your obligations and minimum monthly payments due on all your other debts. "

That said, despite the longer maturities, remember to include a repayment plan for your student loan.