Paying off credit card debt can be very stressful. Between large interest rates and making only the minimum payments each month, it is hard to get out of debt, especially in a short time. After the COVID-19 pandemic hit, Canadians are more worried now than ever before about how they will pay their bills.
Credit cards are mainly used a convenient way to make purchases quickly, in-person and online. Although many manage to pay their balances in full, it can be just as easy to fall behind. Sudden growth in debt could arise due to job loss, interest rate increase, major life changes (divorce, injury, death in family), or emergency medical expense. Although credit cards can be useful tools for making purchases and improving your credit score, they can also easily your hurt credit score if you do not keep up your payments or are consistently maxing them out.
Tips to Decrease your Credit Card Debt
Fortunately, there are ways you can decrease your debt and restore your credit.
#1. Pay more than the minimum requirement
When you pay only the minimum, the majority of the money only goes toward the interest and not the principal, the amount you actually owe. By saving extra money each money and applying it to the debt, it could help decrease your debt a bit quicker. Of course, it will help by not using the credit card as well.
#2. Switch to a credit card with lower interest rate
If you’re struggling with credit card debt, you can call your lender and ask for a lower interest rate. If you default on your debt entirely, the lender will earn less money off your interest owed, so it is in their best interest to agree for a lower rate. If the lender says no, you go elsewhere to a lower interest card or use a balance transfer promotion.
#3. Avalanche vs Snowball Method
The Avalanche Method is making the minimum payment on all your debts, and applying extra money to the debt with the highest interest rate. This method minimizes the interest you pay while paying off multiple debts. The Snowball Method repays debt by amount owed, smallest debt to largest, regardless of interest rate. You can pay off each debt one by one.
#4. Use a Debt Consolidation Loan
Debt consolidation is a tool that helps you simplify your credit situation to a point where you only have to worry about paying one debt each month. With this option, you can reduce your debt, get rid of compounding high interest on your credit cards, and get back on track with your credit. This could also help minimize the total amount of interest you will pay.
At Freedom Capital, our lending specialists will help you consolidate your multifaceted high-interest debts into one single payment to get you out of debt faster. Combining two or more debts into one payment results in lower payment amounts and reduces your financial and mental strain. With our debt consolidation services, you can shorten your debt journey, have a stress-free life, and a carve a path to financial freedom.
If this sounds like the right option for you, schedule a call with one of our specialist 1-866-944-7778 or send us a message.