What Happens Once I Pay Off an Account?

Dear Jeff,

If I have 10 creditors and one is paid off before the end of my program, what happens to the money that was going towards the debt? Does more money get put to another creditor or is this your profit?
Chatham, ON

Hi James,

When one debt gets paid off, the money that was used towards that debt gets moved over to make larger payments on the next highest interest debt. On a typical debt management program, interest rates are dropped to 8-10 percent, but some creditors can go to zero percent. Your monthly payments “cascade” in a way, where money gets moved down the line until everything has been dealt with. So when you pay off one debt, you speed up the payoff on other debts to pick up momentum.

That being said, at the end of your program once you’ve successfully paid off your debts, the counsellor may ask if you want to make a contribution so the organization continue to help other people in similar situations to what you faced. This is not required and there’s no penalty or even hard feelings for saying no. If you have the means to pay it forward, great.

Jeffrey Schwartz
Executive Director

Jeffrey Schwartz is the Executive Director of Consolidated Credit Counseling Services of Canada and President of the Credit Association of Greater Toronto (CAGT).