Help With Debt & Tips for Canadians Who Are Struggling

Many Canadians are currently struggling with debt and overwhelmed by the prospect of winning back their financial health.

If you’re currently struggling with debt and searching for help, it can be hard to know exactly where to start and what to do. We’ve collected all the top strategies, debt assistance resources, and information on how to reduce debt.

If these thoughts sound familiar, this article is for you:

Why isn’t anything working?
How is just budgeting ever going to get me out of this debt?
I can’t get out of this debt unless something changes.
I’ve tried making more money, but I don’t have more time or other skills.

If you’re struggling with a high-interest loan that’s impacting your day-to-day life, we recommend reading more about debt consolidation with Parachute.

Key Takeaways

Getting organized, understanding where you stand, and making a plan are the first steps towards tackling your debt.
There are multiple different budgeting methods, don’t be afraid to try more than one and see what works best for you.
If you’re struggling to make your monthly payments and facing high-interest debts, debt consolidation could be a viable option to give you immediate relief and build back your financial health.

Understanding Your Debt

Before you can begin to pay off your debt and rebuild financially, it’s important to understand where you are. If you’re dealing with multiple different types of debt, this may be the exact thing you’ve been avoiding!

Understanding your debt can feel overwhelming at first, but it’s an essential first step.

Most debts fall into one of the following categories:

Credit Card Debt
Consumer Debt
Personal Loans
Student Loans
Auto Loans
Lines of Credit
Payday Loans

Making a Plan

Step 1: Make a list of all your debts

Before making any sort of decisions or actions, start by making a list of all your debts. Write down the relevant amounts, interest rates, payment frequencies, minimum payments, and due dates for each debt.

Step 2: Make a list of all your income & expenses

Go through the same process for your income and expenses:

How much do I get paid, and how often? On which dates?
Do I have any secondary income sources?
What are my fixed monthly expenses? (Rent, mortgage, phone plan, etc.)
What are my variable monthly expenses? (Groceries, entertainment, etc.)

Step 3: Evaluate your options

Equipped with these numbers, you can start to consider your options. Here are a few different situations you might encounter:

“My expenses and minimum payments are higher than my income.”

If your numbers leave you feeling like this, it’s important to take action and avoid your missing minimum payments. Debt consolidation with Parachute is one option that could give you immediate relief and help you rebuild your financial health while earning cash-back.

“My expenses and minimum payments can be covered, but nothing more.”

If you’re only able to pay your minimum payments, you may have a hard time paying off high-interest debt. If this is the case, start with behavioural and budget edits: Are there unnecessary expenses on your list? Are there secondary income sources you could explore?

If not, you can evaluate external support options like debt consolidation or credit counselling. It’s important to take action, ensure you can work on your debts, and build a safety net.

“My expenses and minimum payments can be covered with some money left over.”

If this is the case, but you’re still struggling to pay your debts, we recommend taking the time to review your budget and financial habits. Are you using a budget that works for you? Are you adding more debt? Do you have a debt payment strategy?

Step 4: Speak to someone

Now that you understand your financial situation and your potential options, we recommend speaking to a professional who can help you make the right decisions. Be sure to evaluate accreditation and affiliations before taking financial advice from someone.

Step 5: Build a detailed budget

With all the information you’ve retrieved in the first 4 steps, you can now build a detailed budget that will serve as your month-to-month guide. In the next section, we’ll go over the logistical and mental tips for building a budget that actually works for you.

How To Build a Successful Budget With Debt

If you have debt that’s impacting your life, it can be hard to stick to a budget– or even create a budget to begin with. You may be feeling like a budget can’t really help you, but it can actually make a pretty big difference. There are so many different ways to budget, templates to try, and advice from different sources.

We highly recommend trying different things to find what works for you. Don’t give up after one try! Budgeting is a mental game too, and different things work for different people.

Here are a few tangible tips specifically for building a budget with debt.

Tips for Your Budget

Start with the essentials: Necessary expenses & minimum payments. When planning out your monthly budget, put these 2 items on top. After these are taken care of, you can move on to additional debt payments and recreational spending.
Pay attention to due dates and payment dates: If you get paid on the 30th, but you have a minimum payment due on the 18th, you’ll need to plan for this! Ensure that you understand when exactly money will be flowing in and out. If you’re struggling to keep track, using a second bank account for just your bill payments can help simplify things.
Write it down: Find a method of tracking and documenting your budget that actually works for you. Whether that’s a mobile app, a spreadsheet, or a good old fashioned notebook, get it in writing.

Strategies to Help With Debt

There are many ways to tackle debt, but let’s focus on the specific strategies you can start using today. The key is to have a plan, not just blindly make and stress about your payments!

Focus on High-Interest Debt (The Avalanche Method)

Because of the high-interest rates, it can be mentally overwhelming and extremely difficult to pay off this kind of debt quickly. Focusing on this debt first can help you alleviate your financial stress as fast as possible.

To start with this strategy, identify your highest-interest debt and focus only on this. Using your budget, identify how much you can afford to pay each month, and how many months this debt will take to pay off. You can use a debt calculator to check how long it will take based on your interest rate and payments.

Having a specific end date in sight is helpful to stay motivated!

If your interest rate is extremely high (39.99% - 46.99%), we recommend evaluating other options like debt consolidation to help ease the burden.

Focus on Small Debts (The Snowball Method)

The Snowball Method takes a slightly different approach, starting with your smallest debt. By focusing and paying off your smallest debt first, you can build motivation and quickly reduce the amount of different debts you have to pay.

Start by paying off your smallest debt first, while only making minimum payments on the other debts. Once you finish paying off the small debt, you move onto the next one. This method is ideal for people who are struggling to find motivation or overwhelmed by the amount of separate debts they’re dealing with.

Getting Credit-Savvy

Debt can have a serious impact on your life and your future, and one of the reasons for this is its impact on your credit score. In order to get out of debt, and avoid future debt, you need to understand and care for your credit score.

A few tips to maintain and protect your credit while dealing with debt:

Focus on hitting your minimum payments and paying on time.
Avoid opening new lines of credit.
Keep your credit utilization as low as possible, avoid adding new debt.
Consider consolidating high-interest debt if you’re struggling to make the monthly payments.

Stay Consistent

Staying consistent is the key to so many things in life, and paying off your debt is no exception. Staying consistent with your payments is important, but also take the time to be consistent with your budgeting and financial literacy. Sit down with your budget every month or even every week. Understand and take ownership of your financial situation– don’t avoid it.

Options for Canadians With Debt

Budgeting and mindset are not always enough to get you out of debt. These are both crucial places to start, but serious debt requires serious action. Luckily, there are many resources available to Canadians who need help with debt. Here are the top resources to help you.

Debt Consolidation

Debt consolidation involves combining multiple high-interest debts into a single payment with a lower interest rate. Parachute offers the only debt consolidation loan that also gives you cash-back and helps you rebuild your financial health, while reducing your monthly payments and simplifying your finances.

Credit Counselling

Credit counselling involves working with a certified credit counsellor who provides personalized financial advice and guidance.

Debt Management Program

A debt management program (DMP) is a structured repayment plan facilitated by a credit counselling agency.

Debt Settlement

Debt settlement involves negotiating with creditors to settle debts for less than the full amount owed. Debt settlement companies or individuals may negotiate lump-sum payments with creditors, often resulting in a reduction of total debt owed. However, debt settlement can have negative consequences on credit scores and should be approached cautiously.

Frequently Asked Questions

Who can help me get out of debt?

There are many options for Canadians who need help with debt. Options include speaking with a financial advisor, pursuing debt consolidation, and more. You can always contact Parachute’s well being-focused financial advisors here.

What can I do if I can’t pay my debt?

If you can’t make your debt payments, it’s crucial to take action as soon as possible. A debt consolidation loan could help you reduce your payments and give you immediate relief. Check if you’re eligible for a loan of up to $25,000 here.

How to pay off $10,000 credit card debt?

Paying off $10,000 in credit card debt can be a challenge, but it’s possible. Start by evaluating your total income, total debt, and interest rates. With this information, you can create a realistic monthly budget and action plan. If you have a hard time sticking to your payment habits, start with just the minimum payment, and then go from there. Try to avoid adding additional debt onto the credit card while you’re working on paying it off.

Who is the best person to talk to about debt?

Debt can be a sensitive subject, and the decisions you make can have a long-term impact on your future. That’s why we recommend speaking to accredited professionals who care about your financial health. Be sure to verify the credentials of anyone you speak to about your debt, as well as their affiliations. Ensure that the advice you are seeking does not come from someone who is trying to sell you a specific financial product. If you’re unsure, we recommend getting a second opinion, asking a loved one for their perspective, or doing your own supporting research.

Remember, you can always talk to a Parachute financial coach at contactus@myparachute.co (844) 670-2403, or apply here to see if you may benefit from our debt consolidation loans.