PROS AND CONS: 4 DEBT MANAGEMENT OPTIONS

If you are reading this, chances are you are struggling with debt. Now, you might be weighing the pros and cons of different debt management options that might work for you.

Financial distress can be extremely draining, mainly if creditors and debt collection agencies call. We want to help you through this process as easy as possible. This post will help you learn more about the different debt management solutions and how each could benefit you.

4 DEBT MANAGEMENT OPTIONS TO CONSIDER

Interest charges keep piling up, making the situation feel hopeless. The licensed insolvency trustees and debt counsellors at Fox-Miles & Associates Inc. want you to know that debt does not have to be futile. We specialize in relieving financial distress by offering debt-help solutions in Edmonton and the surrounding areas.

Let’s talk about some debt management options and weigh the pros and cons of each.

OPTION #1: MAKE THE MINIMUM PAYMENTS

Our bankruptcy trustees have noticed that in some situations, people don’t even make the minimum debt payments each month (e.g., on a credit card, overdraft, or line of credit). Often the person in debt feels like there is no point – the amounts owing seem so significant, and the minimum payments seem so small.

While the minimum payment may seem insignificant, failing to make it can have a significant consequence – missing the minimum payment can negatively impact your credit score. As such, at the very least, you should be making the minimum payment each month. The pros of this option are that it is relatively easy, protects your credit score, and keeps you in good stead with creditors.

The con is that paying down your debt will take a long time if you only make the minimum payment. The other major con of this debt management option is that it is expensive, as interest will continue accumulating on your debt each month.

OPTION #2: PAY MORE THAN THE MINIMUM

The pros of this option are the same as for Option #1. But Option #2 will get you out of debt somewhat faster and save you some money.

Paying more than the minimum each month will reduce the principal balance owing, even if just by a little bit each month. Chipping away at the principal balance will decrease the time it takes to pay down your debt, saving you a lot in interest charges. Any extra you pay each month will help.

Our Edmonton debt counsellors can help you calculate how much you owe, how long it will take you to pay it off, and how much time and money you can save if you pay more than the minimum each month – give us a call today at 780-444-3939 to schedule your free consultation.

(Be sure to look at this post next: 6 Signs You’re Overspending…What You Can Do About It)

OPTION #3: PRIORITIZE YOUR DEBTS

If you have several credit cards, lines of credit, or loans, a practical debt management option is to prioritize the debts in terms of the interest rates applicable to each. You should pay down the most expensive debts (i.e. the debts with high-interest rates) first while making the minimum payment on all other debts. Once you pay off the most expensive debt, focus on the next most expensive debt. Continue in this manner until you have paid down each of your debts.

This option is faster than the options discussed above and can also be very motivating when you see progress in clearing one debt after another.

OPTION #4: EXPLORE OTHER DEBT SOLUTIONS

There are other debt management options to consider, including consumer proposals.

There are critical differences between debt consolidation and consumer proposals, which our debt counsellors will be happy to explain.

You can also learn more about consumer proposals and debt consolidation in these posts:

To find out which option is best for you, contact us today. We can discuss the options for reducing and restructuring your outstanding debt load and submit a consumer proposal on your behalf if that is the best option for your unique situation.

OUR EDMONTON DEBT COUNSELLORS ARE HERE TO HELP YOU FIND THE BEST DEBT MANAGEMENT OPTIONS

The compassionate, qualified debt counsellors at Fox-Miles & Associates Inc. provide helpful financial advice and debt help in Edmonton and clients in the surrounding areas, including Sherwood Park, Fort Saskatchewan, St. Albert, Spruce Grove, Stony Plain, Leduc, Hinton and Edson. Your first consultation is free, so you have nothing to lose except the feeling overwhelmed by debt! Call our offices today at 780-444-3939 to schedule your free consultation.

Did you learn a lot about debt management options in this post?

Here are three more posts you might like to read next:

This post was first published in 2020, but it was updated in 2021 just for you.