Dealing with Debt
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  2. 4 Key Debt Reduction Strategies | Credit Counselling Society

4 Key Debt Reduction Strategies

By Renu Singh-Joseph

If you’re struggling with debt, it can often cause sleepless nights or feel like you’re carrying an extra person around on your back. The burden of debt can be stressful and many people ask themselves, ‘How can I reduce my debt?” The answer is never simple, but there are some helpful debt reduction strategies that you can take advantage of.

1. Track Your Spending

Strategies to help you reduce your debt.Most of us think we know where we spend our money, however through tracking expenses, many people are surprised to learn where their money is actually going each month. An easy solution is to track your spending, at least for a few weeks to get a better idea of your spending habits. This is a great, first step to stay on top of your spending and figure out where you may be spending more than you thought and accumulating debt. You can use a notebook, spreadsheet or an app to make this process easier.

2. Create a Budget

Get back to the basics with a monthly budget. Enter your income and expenses, and start to design your budget. Be realistic and set goals that make sense for you or your family. Remember to not spend more than you earn each month. A helpful tool is our free, easy-to-use budget calculator spreadsheet and worksheet designed for Canadians with the goal to reduce debt quickly.

A budget is a spending plan that allows you to decide how your income will be allocated and spent. Remember to put money aside for necessities like housing, food, utilities and transportation. After this, allocate funds for debt payments, unexpected expenses, savings and miscellaneous items like entertainment. It’s important to allocate money for these type of expenses, including seasonal items like school expenses, to ensure you don’t incur further debt by relying on credit to pay for living expenses.

3. Managing Credit Card Debt

Paying off credit card debt can seem like a daunting task – so where do you start? The best way to settle credit card debt is to start off small. Review your cards and separate them based on rates: low interest versus high interest. Start to make the minimum payments on your credit cards with low interest rates and then maximize payments on cards with high interest rates. After a debt is paid off, you can use the extra money to pay down the next credit card with the highest interest rate. Another solution is to tackle credit cards with low balances and focus on paying off these cards in full, then closing the account. This approach empowers people by encouraging them to continue paying down their consumer debt.

If you apply for a debt consolidation loan and the loan isn’t approved, you may be able to  obtain consumer credit card relief by consolidating all of your credit card balances onto one credit card with a low interest rate. The goal of a credit card consolidation loan would be to make frequent payments at a set amount each month to pay off the credit card debt. You can figure out how much this will be in advance and incorporate it into your budget. There are other advantages and disadvantages in regards to the consolidation of credit cards.

4. Debt Consolidation

People often hear the term debt reduction loans, and wonder is it good to consolidate debt? While this may vary depending on a person’s situation, a debt consolidation loan is a loan that provides you with money to pay off outstanding credit card debts and ‘consolidates’ the debts into one big loan.

To get this type of loan, you can approach debt consolidation lenders, such as banks, credit unions and certain finance companies. In terms of interest rates, banks and credit unions usually offer the best debt consolidation loan rates.

Low interest debt consolidation loans can range from 7% to 12% when dealing with banks, whereas finance companies can charge 14% updwards for secured loans to over 30% for unsecured loans. There are a number of factors that can help you get a low interest consolidation loan, including credit score, income, net worth, relationship with the bank or if you have collateral for a loan.

A consolidation loan is just one of many debt options, but keep in mind that there are other advantages and disadvantages in regards to debt consolidation loans.


Dealing with consumer debt can be overwhelming, and if you need help with financial debt relief, we are here to help. Please give us a call to make an appointment to speak with one of our credit counsellors, who can assist you and provide guidance on a range of topics from debt settlement programs to how debt relief works and options for debt consolidation. All calls are free, confidential and non-judgemental.



Worried about debt?

Get help to overcome it.

The sooner you start dealing with your debt, the sooner you see an improvement in your credit report If you need some help getting started with a plan, or if you’re not sure if your budget is realistic, contact a non-profit credit counsellor for free, confidential help. Typically, the earlier you contact us, the more options you’ll have.

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