6 strategies to pay down your debt


A four-letter word feared by many, and for good reason.

Trust me, I’ve been there. It was a relatively small amount of debt, but any amount can be a great burden to carry.

Whether you’re carrying debt from your credit cards, student loans, a mortgage, or other sources, the stress of not being on top of your finances can be extremely frustrating.

In fact, according to this study, many people say they lose 40 minutes at work every day to being distracted by personal financial matters.

And stress can have a real and significant impact on your health. If it’s financial stress, your wallet can take a big hit, too—but have you thought of the toll it can have on your credit score?

How debt affects your credit score and your wallet

When you’re in debt, that means your credit utilization is high. If you’ve either maxed out an account, or are close to it, this can have a significant impact on your credit score.

If your score’s low, it can reduce your chances of getting approved for a mortgage with a good rate, a new credit card, or even a new phone plan. Plus, the interest you’re paying on top of your debt can be significant and debilitating, so paying off your debt as soon as possible should be one of your top priorities.

Here are our top tips for taking back control of your finances.

Tip #1: Pay more than the minimum payment on all of your accounts

This isn’t always an option for everyone, but when you can, try to make more than your minimum payment, or make extra payments throughout the month. These seemingly small acts will really pay off in the long run and can snowball quickly.

Tip #2:  Pay down the account with the highest interest rate first

One of the first things you should do is look at the interest rates you’re paying. If your debt is coming from more than one source, make sure to pay off the account with the highest interest rate first, so you can avoid paying more interest than you have to.

But be sure to make at least the minimum payments on every account. Missing a minimum payment can have a significant impact on your credit score, so do everything you can to make your minimums every month.

Tip #3: Create and stick to a strict budget

Creating and sticking to a budget can be hard, but it’s always worth it.

And budgeting isn’t just something you should be doing when you’re in financial stress—it’s a long-term strategy that will help you get back on top of your finances, and stay there.

Here are a few questions to help you get you started:

  • How much do you spend on rent or your mortgage?
  • How much on bills? Is there room to cut some of those costs?
  • What do you spend on groceries every month?
  • Do you eat out often? Is that necessary? Can you cut down on going out to save a few extra dollars every month?
  • And finally, how much do you spend on entertainment? This includes bar tabs, concert tickets, outdoor events, hobbies, etc.

When you take the time to think about all of these things and set a budget, it’s much easier to be sure you can make your payments, and to make a plan to take back control of your financial life.

Sticking to your budget puts you in the driver’s seat by giving you a clear understanding of your finances, putting you one step closer to never being in debt again.

Tip #4: Set up payment plans, and ask for a lower interest rate

Make a finance date with yourself. Break out the calculator (and possibly a bottle of wine), and make a real, concrete plan to attack your debt once and for all.

Start by listing your debts from the highest interest rate to the lowest, or maybe from the largest amount of debt to the smallest, and make paying down these debts one of your top priorities.

Having a way to visualize your debt can make it feel easier to pay off. And knowing exactly how much interest you’re paying on the principal can really (really) spark your motivation.

While you’re at it, it never hurts to ask your lenders for a lower interest rate. Really, the worst they can do is say no. Just try it. If it works, it can save you a huge amount of money in the long run, and it’s well worth the courage it takes to make that phone call.

Tip #5: Get a balance transfer credit card

If your debt can be transferred, it’s worth having it all in one place by putting it all on a credit card that has a good balance transfer rate. These rates are almost always better than any short- or long-term loan a bank will give you.

There are often credit cards running great promotional interest rates for balance transfers, so take the time to research and find the best card for you and your debt.

One extra tip, however: be sure to pay off your balance in full BEFORE the promotion is over. If you don’t, the higher standard interest rates will kick in and start chipping away at any progress you’ve made.

A second tip? Never use your balance transfer card to make any purchases until you’ve paid off the original amount you transferred.

Any payments you make will always go to the portion of your balance that has the lowest interest rate (in other words, the balances you transferred), and you’ll continue to be charged the higher interest rates for any extra purchases you’ve made.

Resist and be disciplined. Paying off the amount you transferred should be the only thing you do with that credit card until it is completely paid off. You can reward yourself later, once you’ve got that all taken care of.

Tip #6: Consider consolidating your debt

If you’re struggling with a number of different debts with varying interest rates, debt consolidation is a strategy that can save you a huge amount of interest over time.

There are a number of options for this, including:

  • Debt consolidation loans
  • Home equity loans
  • Debt management programs
  • Lines of credit

Debt consolidation can be scary, however. We’ve asked someone who has taken this road themselves, and this is their advice:

“It’s often best to do it with a bank, rather than with a third-party company. You don’t want to end up paying an interest rate of 45% or more, no matter how desperate you are. These non-traditional lenders tend to target vulnerable people in the darkest of times, and you can end up in a deeper hole than you started in.”

Follow these strategies to pay down your debt and you’ll be in great shape.

About Stephen Weyman

Stephen Weyman is the founder of HowToSaveMoney.ca, a website dedicated to... well, you can probably tell from the name. He covers credit cards, travel, shopping tips, food, and even student savings strategies.

He's also the founder of creditcardGenius, a website that rates credit cards in real time based on the user's priorities, and launched the first Canadian credit card comparison app on Android and iOS.

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