How to Pay Off Debt and How to Handle Debt

Posted on Monday 29 June 2020

Debt is a fact of life—we all have some of it, whether it’s from a credit card, a mortgage, a car loan, or anything in between. And in many ways, debt is actually a good thing! Taking out loans or lines of credit helps determine your credit score, which will in turn impact your ability to sign a lease, take out student loans, or make a big purchase, such as a car or a house.

While having a little bit of debt isn’t bad, if you’re not careful, you could find yourself in a situation where your debts become overwhelming. If you’re spending more than what you can pay each month—or if you’re struggling to make your minimum payments—it’s time to break free from that debt cycle!

If this sounds like you, keep reading: we’ll share some great tips on managing your finances and getting out of debt. Before you start making moves to pay off your debt, you need to have a good understanding of how to handle debt overall. Start by utilizing the two simple steps below—your financial health is worth it!

Step 1: Get Real About Your Debt

Debt is one of those things that are really easy to set aside and avoid. After all, owing money is anything but fun. Even talking about money problems is hard, regardless of whether you are talking to your mom, your significant other, a credit counsellor, or a stranger on the street.

If anything, debt has the power to cause significant emotional and mental repercussions like high stress levels, anxiety, lack of sleep, strained relationships, and high blood pressure. But one of the best ways to handle your debt is by cutting through all of the avoidance and getting straight to the point.

Stop throwing out your overdue bills and ignoring email reminders. Be honest about the debt you have, instead of avoiding it. Tally up all of your outstanding debts by creating a list of the total dollar amount that you owe on:

  • Credit cards
  • Store credit cards
  • Auto loans
  • Personal loans
  • Any other debt you may have, such as a mortgage, overdue utilities, loans from family members, etc.

Make sure you list each individual account out separately. If you have a ton of credit cards, this might be a little intimidating—but it’s a crucial first step!

Step 2: Get Transparent with Your Debt

To effectively handle your debt, you’ll need to account for every dollar and know exactly how much you are paying. Make your debt as transparent as a Ziploc bag. Take the same list and add the following elements to it:

  • Minimum payment requirements
  • Interest rates
  • Monthly finance charges
  • Due dates
  • Credit limit (if applicable)

Creating this detailed list gives you important insight into how much you are paying fees and interest vs. the payments you are making. Handling your debt is all about becoming your own bookkeeper—and while it might not be the most exciting way to spend a Saturday afternoon, it’s an important part of boosting your financial health. When it comes to handling debt, full transparency is key.


How to Pay Off Debt—For Good!

Armed with a solid understanding of how much debt you have (and how much it’s really costing you), you’re ready to start paying it off. Here are some tried-and-true ways to start paying off debt.

Create a Debt Avalanche

The debt avalanche is a good choice for you if you have a few high-interest debts that are eating away at your monthly payments. Use your list that includes interest rates, and order each debt from the highest interest rate to the lowest. Here’s how you can set up your own debt avalanche:

  • Make minimum monthly payments on all debts except for the one with the highest interest rate

  • Put as much money as possible toward the debt with the highest interest rate

  • Once that debt is paid off, repeat the same process with the next account on the list

It will take some time to see results from this method (especially if your accounts with the highest interest rates also have the highest balances) but cutting back on high-interest accounts will save you tons of money over the long term.

Start a Debt Snowball

Carrying on with the snow-themed debt payments (Canada, right?), you can also choose to create a debt snowball. This approach uses your list that focuses on the total dollar amount. Order each debt from the highest dollar amount to the lowest. Here’s how you can start a debt snowball:

  • Make minimum monthly payments on all debts except for the one with the smallest balance

  • Put as much money as possible toward the debt with the smallest balance

  • Once that debt is paid off, take that same payment amount and apply it to the next account on the list

This approach is really great if you want to see results sooner—and if you’re feeling overwhelmed or stressed out about your debt, the ability to see results in a few months can make all the difference!


Consolidate or Refinance Your Debts

One of the best ways to set yourself up for success in paying off debt is by making it as simple and as straightforward as possible. Consolidating debts is a go-to method for anyone who has multiple forms of debt from more than one lender. Instead of making five or ten payments each month, you can combine your debt into one loan and make only one payment.

That also means that you get just one interest rate, instead of multiple—and depending on the lender, you might even get a better deal on interest, too! (This is especially true for credit card debt, which has some of the highest interest rates out there.) A lower interest rate will help you save money over time, which is a huge boost to your long-term financial health.

You could take out a larger personal loan and use those funds to pay off your debt, or you can get a series of short-term loans to pay off smaller debts, one by one. The good news is that short-term loans have the benefits of fewer requirements for lending history, credit score, and income—which makes them a great option for borrowers with credit scores that have dropped due to debt.

Refinancing is also a great option for the larger debts, such as an auto loan or a mortgage. You might not see results immediately, but you’ll save money over the life of your loan with a smaller interest rate. Just don’t rush into refinancing: take your time, shop around with different lenders, and make sure that you are getting the lowest possible interest rate.

Being in debt is tough, and there’s no doubt that it can be a stressful time. But taking these first steps will make a huge difference in your financial health! Stay committed to being real about your debt and staying transparent, and choose the debt-paying method that works best for you.

If you want to learn more about short-term loans and how they can help you get out of debt, My Canada Payday is here to help! Call (604-630-4783) or email ( to chat with our support team and find out why thousands of Canadians keep choosing My Canada Payday for their short-term loans.