Debt Free Faster

Are you drowning in debt? If this is you are not alone.

Debt has grown like a virus over the last 10 years in Kelowna. Incomes in the Okanagan are stagnant for many, others are out of work and now paying off personal debt seem almost impossible.

Before you give up here are three ways to deal with your debt that can work ...

Stack Your Debt 
Debt Stacking is nothing new, and it can shave years off your debt.
  1. Is write down all you current debts and payments from smallest to largest.
  2. Add any prepayment amounts to the first debt of list in addition to your current payment and continue paying all your other debts.
  3. Once debt 1 is paid off add the payment plus and addtional payment to next debt on the list.
  4. Continue with this until all is paid off.
Pro - Easy to do and costs you nothing.
Con - You must stop using your credit cards for this to work.

Consolidate Your Debt - Unsecured Loan
This also is nothing new, and if done right can help you manage and pay off your debt faster. Consolidations ideally works for some that is having a cash flow issue and can't maintain your current payment plan.

Here a few things to consider
  1. Don't be to aggressive on your payments. If you are running behind each month (as most people are that are in debt for a long period of time) may sure you can pay the debt off.
  2. This approach almost always ends up costing you more than you expect. If you are doing this because it seems cheaper .... think again.
  3. Make sure to get a competitive interest rate, with flexible terms. Things can happen during the life of the loan, and should have freedom pay off sooner if you can.
Pro - You can free up cash to keep you cash flow positive
Con - Almost always takes longer and costs more than expected

Consolidate Your Debt - Mortgage/LOC
This options has become the most popular as banks and institutions are looking to convert unsecured debt into secured debt. Interest rates are less for customers but their is greater security for lenders.

So if you are looking at this option ...
  1. All the issues from the Unsecured Loan above apply
  2. When redoing your mortgage you could very likely have fees to rewrite your mortgage.
  3. Depending on the amount you are adding it could also push your mortgage high ratio and this can cost you even more.
Pro - Can free up even more than a Unsecured Loan at a lower interest rates
Con - In the short term the fees can make this prohibitive.

Which option is right for you?

Do a before and after for each that applies in your case, and if necessary seek out the advice of a financial professional to help you put these ideas in writing. Regardless of the method you choose here are few things that central to your success ...
  • Update your budget and monitor your spending at least once a month until you are debt free. Do not spend until this is done.
  • Is your spending the issue or is your life style too expensive to maintain. Make changes where you can.
  • Use cash for all future expenses and STOP using you credit cards.
  • Use every extra dollar to pay off your debt as quick as possible. If you are using stacking 2-3 years, Unsecured loan 3-5 years, and mortgage now more than 10.
  • Don't focus on interest rates, flexibility will save you more.
  • Reward yourself in small ways as you achieve your goal.
Good luck on you debt freedom goal!

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