Allison Cosgrove, the Blue Jean Mortgage Queen providing solutions and results for homebuyers in Mississauga, the GTA, and Golden Horseshoe areas, is known for her open, honest, approachable service for home buyers and sellers.
Today she discusses how to tackle household debt. It’s not as daunting as it seems! The key is to simply get started.
“Debt can feel scary and overwhelming,” says Allison. “However, it’s like that check engine light on your car. The longer you ignore it, the bigger the problem is in the end. Rather than ignoring your debt, work with a mortgage broker or other financial professional and create a roadmap to being debt free. It is possible and there are many solutions including budgeting, consumer proposals, consolidation, and leveraging home equity.”
Allison breaks down some of the pathways to debt management success:
- Create a Budget: Start by assessing your income and expenses. Identify areas where you can cut back on unnecessary spending and allocate more funds towards debt repayment.
- Debt Snowball or Debt Avalanche Method: These methods involve prioritizing your debts and paying off the smallest balance or highest interest rate debts first. By focusing on one debt at a time, you can gain momentum and eventually eliminate all your debts.
- Seek Professional Help: Consider working with a credit counselor or financial advisor who can provide guidance and help you develop a personalized debt repayment plan. They can negotiate with creditors on your behalf, consolidate your debts, and provide valuable advice on managing your finances.
- Home Equity Loans: If you own a home, you may consider using a home equity loan or line of credit to consolidate your debts. This allows you to pay off high-interest debt with a lower interest rate loan secured against your property.
There are two more options that can be considered, however only as a last resort and under the guidance of a personal finance professional. Both of the options below help homeowners get out of crushing debt cycles, but if they are looking to buy a home, these solutions greatly impact financing opportunities.
- Consumer Proposals: This is a legal process where you work with a Licensed Insolvency Trustee (LIT) to negotiate a reduced payment plan with your creditors. This option allows you to avoid declaring bankruptcy while still resolving your debt.
- Bankruptcy: As a last resort, bankruptcy may be an option for individuals facing overwhelming debt. It provides legal protection and assists in eliminating or reducing debts. However, it has long-term consequences and should only be considered after seeking professional advice.
Allison concludes, “Remember, it's essential to consult professionals who specialize in debt management before making any decisions. If you are saving for a home or are facing larger debt than expected after buying a home, help is available. Tackling debt is always a positive step and many experienced professionals are here to help you get back on track.”