The MoneySense Guide to Debt Management: How to get out of debt

By Lisa Hannam on August 18, 2021
Estimated reading time: 4 minutes

Are you wondering how to get out of debt? Maybe you've heard that deferring mortgage payments or consolidating what you owe can help. We created this guide to help you understand your options and get on the right path to pay down your debt.

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A woman at her computer, reading her bills.

Photo by Mikhail Nilov from Pexels

Being in debt doesn’t mean you are terrible with money or bad at budgeting. Debt is affecting most Canadians right now, with many regularly paying less than the full balance on their credit card statements, perhaps deferring mortgage payments, or putting off home repairs, and more. If that sounds like you—how can you pay off debt fast? This guide will help you get started.

How much debt is Canada in?

You don’t need to be a finance expert to understand that the COVID-19 pandemic has changed how we use money (have you noticed how much more often you’re tapping your card instead of touching the keypad to enter your PIN?). It’s affected our borrowing, spending, debt repayment and saving habits, too. Statistics Canada reports the average household’s debt-to-income ratio rose in 2020. This measures the household debt, in relation to disposable income. In the first three months of the year, the ratio stood at 175.4%, which, according to MoneySense contributor Alexandra Macqueen, “means that, across all Canadian households, in the first three months of 2020 we collectively owed $1.75 for every dollar of disposable income we have. That is very close to the all-time high of 179% in late 2017.” (See Macqueen’s article Canada’s climbing debt-to-income ratio: what you need to know.) MoneySense partnered with CIBC and its Pace It credit card to bring together this collection of articles about debt management. See links throughout this page for the stories. Each one offers achievable ways to identify, take action and get in control of your money.

The definition of “debt” and what it means to you

Simply put, debt is money owed. But figuring out how much total debt you have and how to tackle it may seem more complicated. Try breaking it down into steps, like in the article How bad is your debt? It gives these steps to truly understanding how much debt you have. Start by making lists for everything you owe, from the highest interest rate to the lowest, including:

How much you owe
What your interest rate is
How much you pay in interest each month
What are your required minimum payment

Don’t include your mortgage on this list (more on mortgage debt, below). Do include any other loans, including school, car and personal, your credit card, etc. Once you do that, you can create a plan or a budget to pay it off within a realistic timeframe. Other articles on dealing with debt include:

Can a credit card be a debt management tool?

Have you ever thought of using a credit card to manage and pay off debt? It may seem like the type of advice from the same person who’d recommend hair of the dog to cure your hangover. But there are credit cards created specially for those experiencing debt, specifically with low or no-fee features, such as balance transfer offers for consolidating credit card debt. (More on that in the article Ways your credit card can help you manage debt.) There is also a new type of card feature that works like a layaway/installment plan, which you can add to your current credit card. (We break down how it works with CIBC Pace It here.)

Dealing with mortgage debt and paying it off quickly

What is a mortgage? It’s a bit different than other loan debt, in that a mortgage provider secures and lends money with interest, using the property as collateral. If any conditions aren’t met (like missing a specified number of payments) then the title goes to the mortgage provider. Also, mortgages have lower interest rates, tend to be provided for real estate and have longer terms, as compared to personal loans. The article How does credit card debt affect a mortgage application? ties nicely with the credit card section above. It is about how credit card debt looks to a potential mortgage provider. You may be surprised to know how the amount you owe could affect how much you can borrow, the interest rate and whether you qualify for a mortgage at all. Plus, good news for those who make regular payments: It ties into your history, too. Looking to pay off your mortgage? Here are six ways to do that faster than making only your regular payments. Some of the tactics may surprise you. Since we’re living through a pandemic right now, we also included the article Your mortgage payment deferral is over. Now what? It gives solid advice for people whose incomes have yet to return to “normal.” So, whether you are looking to make a big purchase soon, understand how debt works, or pay off some debt, there’s useful information and actionable strategies for you here.

More on financial advice:

About Lisa Hannam

Lisa Hannam is the editor-in-chief at MoneySense.ca. She is an award-winning editor with over 20 years of experience in service journalism.

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sharon dutkevich says:

November 8, 2021 at 6:19 pm

when The bay changed their credit cards I only used Capital 1 for that purpose so I applied for their new one neo but the teller mistakenly paid my statement with the old one so i asked to be reimbursed and it is 2 months and i still have not received the money back into my account. This seems to be taking a long time—–

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