Which Debts to Pay Off First in Canada: Quick Guide

Which Debts to Pay Off First in Canada: Quick Guide

Posted on June 1, 2022

Our Beamsville auto loan team will often recommend to pay off high interest debt first whenever we assist clients with budgeting. It saves paying out on interest and means for every cent you pay, more goes to paying the principal amount rather than interest.

With that in mind, we asked that very same Beamsville auto loan team to share the methods they suggest for paying off high interest debt.

Know where you’re at

Your first priority is to know what debt you have, how much and at what interest rate. It’s essential to do this first so we know exactly how much you owe and how and what to prioritize paying off.

List all your debts in a spreadsheet. List the amounts and the interest rate in order of expense to make them easy to understand.

Consolidate your debt

Debt consolidation is a fancy way of saying get a loan to pay off all your other debts. You could get a personal loan to pay everything off or refinance your auto loan to do it.

Either way, if you can pay off high interest debt with a single, cheaper loan, it’s a no brainer.

You’ll save money on interest and will have only a single payment to manage. That means potentially paying off much more of the principal amount each month rather than interest.

Refinance your auto loan

Technically, auto loan refinancing in Beamsville is the same as debt consolidation but it’s a little more complicated than getting a personal loan and paying everything off.

Refinancing an auto loan depends on your having paid off a decent portion of the loan and having equity in your car.

For example, you had a loan of $45,000 and have paid off $15,000. Your car is worth $35,000, meaning you have $5,000 of equity in the car.

If this would cover your other debts, you could refinance your Beamsville auto loan to the value of the car, pay off everything with that $5k and have a single monthly payment to manage.

Negotiate the debt down

If you’re in genuine financial trouble, or about to be, you can work with your creditors to negotiate the debt down. This will only work if you’re in real danger of defaulting or going bankrupt.

If a lender has a choice between getting half their money or none, they will always choose half. It won’t be easy but you have the right to negotiate your debt down, but only if you’re at genuine risk of defaulting.

Switch credit card balances

If most of your debt is on credit cards, you can juggle them so you will hardly pay interest at all.

Find a 0% credit card or balance transfer credit card with sufficient credit to transfer most, or all, your debt. Pay off as much as you can during the interest free period.

Then, when that period is almost up, find another card and transfer the balances.

This takes a little organization but done well, you could pay very little interest and low fees for each transfer.

If you need help refinancing your auto loan, contact our Beamsville auto loan team.

We will use all our skill and experience to deliver the lowest possible Beamsville auto loan rates, guaranteed. Contact Car Nation Canada Direct to learn how we can help.

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