Ever wonder why people hire the services of credit counsellors? Or why they try to figure out where the debts came from or how much they cost in interest? Understanding how much it costs to carry debt can be a significant motivator for someone to want to get out of debt. Knowing options such as Consumer Proposals and debt settlements can significantly reduce outstanding debts and eliminate interest.
When the debts are high, one might tend to avoid thinking about it at all. Out of sight is out of mind. The truth is that this method makes things much worse. It is always better to deal with debt head on. If not, interest keeps piling on and the debt rises out of control. Better to meet it head on at a lesser amount.
If you are tackling your debts on your own (without a debt settlement stopping the interest and reducing the total owing), here’s what we suggest:
Calculate the monthly interest you pay on your debts. For example, if you had 1 credit card that you owed $30,000 on, at an interest rate of 10% per year, the monthly interest would be (30,000x 0.10 / 12) = $250 per month of interest only. So then you know that every 5 years you give the bank $15,000 in interest and still owe the $30,000.
The longer the above goes on, the worse it gets so you need a real plan that pays back the principal of $30,000 within the next few years. This means payments of $500 per month for the principal, plus an additional $250 per month for the interest for a total of $750 per month.
If you cannot afford to make payments that will pay off your debt within 5 years, you may consider a debt settlement. This will change your payment drastically. Now EVERY dollar you pay goes on the principle. No deduction for interest. Plus, you might be able to reduce the total you owe to a reasonable number.
For expert debt help and information on Consumer Proposals and debt settlements in Ontario, call Reynolds and Associates today.