How to Pay Off Debt and Get Ahead

Dear Jeff,

When my husband lost his job, we used our savings to stay afloat. But when we ran out, we had to start using our credit cards to get by until he could find something else. Thankfully he did, and now we have the income we need to get ahead again, or so we thought. We’ve been making payments for about a year and a half but can’t seem to make any headway to get rid of the credit card debt we built up. Why? And how do we make a plan that gets us headed in the right direction?

Judy G.
Aurora, ON

Hi Judy,

This is a really common problem that people run into with unemployment, so we’ve seen more and more cases like yours since the recession. Consumer credit got up to $641,111 in December 2019 alone. The issues you’re having are probably two-fold and here’s why:

  1. During your husband’s unemployment, you probably ran up a large amount of debt on your credit cards. Since most credit is revolving debt, what you owe increases right alongside the amount you charge. So if you use credit to cover cash flow problems in your budget, your bills eat up more income every month and eventually reach a point where you can’t afford to pay.
  2. This is where the second part of your problem rears its head – added interest. Credit cards tend to have high-interest rates. As a result, the majority of each payment you make usually goes to paying off the interest accrued instead of the original debt. The situation gets even worse if you miss two payments in a row. Most creditors will apply a penalty interest rate that will remain on your account until you make six consecutive payments on time.


So if you missed payments on one or two of your credit cards while you were struggling or during this time where you’ve been working to regain control, then you could quickly be facing interest rates close to 30 percent or more. Interest that high on a large volume of debt is a mess for you to try and pay back using traditional means.


Here’s What You Should Do

The first thing you need to do is use a debt calculator to see how long it will take to pay off each credit card debt you have at your current interest rates. If your husband’s income is high enough for you to make more significant payments, factor that into your calculations.

If it’s going to take more than 5-10 years to pay everything off even if you make higher payments, then it’s time to find an alternative. This is where credit counselling can come in handy. A trained credit counsellor evaluates your debts, budget and credit score to help you find a solution that will fit your needs.

Depending on the specifics that you and your husband are facing, you may use:

Consider those last three options only if there’s no way for you to consolidate to get ahead. You can usually consolidate with a debt management program as long as your debts are not behind six months or more – regardless of your credit score. DIY consolidation options typically require good credit to qualify at the right terms, so if you and your husband’s credit score took a hit during your hardship, you might have a hard time consolidating on your own.

If you’re ready to get started, a certified credit counsellor can help you go through all of these options so you can make the right option for your situation. Call us at 1-888-294-3130 to request a free debt, credit and budget evaluation today or start with our online debt analysis.

Jeffrey Schwartz
Executive Director

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