For instance, if you owe money on five different loans and credit cards, a debt avalanche dictates you devote extra funds to the highest-interest loan first. “Once that debt is paid, you roll your funds onto the next highest-interest rate loan,” said Anne Arbour, director of strategic partnerships at the Credit Counselling Society.
Beyond which method works best for your mindset, Hoyes said you should also consider the kinds of debts you have, and to whom you owe them. “All they send you is something that says you’ve got to pay us now,” he said, as opposed to a monthly credit card statement with a minimum payment. “Traditionally, the CRA is willing to accept payment plans where you pay over 12 months.”
Hoyes also recommends exploring ways you can increase your income or reduce your expenses to free up cash flow, be that through extra shifts, a part-time job, a roommate or strict budgeting.
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