How to Conquer Your High-Interest Consumer Debt in 2019

How to Conquer Your High-Interest Consumer Debt in 2019

Getting into debt can happen to anyone, life happens and sometimes things get out of control due to extenuating circumstances. Regardless of how you got into debt, with a little work and changes to your spending habits, it’s possible for, or anyone, to become debt free.

What is High-Interest Consumer Debt?

Consumer debt is defined as a debt resulting from the purchase of goods that are consumable but do not appreciate in value, clothing, and food are two examples (interested in more information about consumer debt? Click here). More often than not, consumer debt is high in interest which is where the term high-interest consumer debt comes from.

Usually, people tend to rack up consumer debt through credit cards, payday loans, or other forms of high-interest lending used for consumption purposes, as opposed to investment or business purposes.

Generally, high-interest consumer debt is a result of an emergency, unexpected expense, or bad spending habits. Unfortunately, we cannot always control what happens in our lives, an illness or loss of a job can cause someone to accumulate consumer debt. In other cases, high-interest consumer debt is a result of poor spending habits due to a lack of personal finance knowledge.

Learn How to Tackle DebtCheck out this infographic to learn how to create your own debt repayment plan.

Tackling Consumer Debt on Your Own

If you have high-interest consumer debt, there are ways to alter and improve your spending habits to pay down your debt and to prevent debt from building up again in the future. Here are our top tips for improving your spending habits.

Learn About Personal Finance

Finance can be a challenging topic, however, there are many articles and blog posts out there that can provide you with the information you need to take control of your finances and tackle your debt. That being said, you still have to take the time to educate yourself about personal finance as knowledge is the first step to bettering your spending habits.

Understand Your Current Financial Situation

When you’re in debt, it can be easy to ignore the problem and avoid fully understanding your situation. In order to make changes, you need to take the time to understand your finances including how much you make, how much you spend, how much you plan to spend in the future, and what you have saved.

In addition, you will need to collect all the information regarding your existing debt, such as who you owe and how much you owe. This information can be overwhelming and expansive, using a spreadsheet is helpful for tracking all of your financial data.

Create a Realistic Budget

Budgeting can be a pain, especially when you have to cut out unnecessary, but often fun or entertaining, expenses that you’ll surely miss. Basically, a budget is a plan for your finances, meaning that you need to be realistic. If you aren’t realistic, you may end up getting frustrated and revert back to your old habits. You want your budget and spending habits to be sustainable to get out of debt and avoid going into debt again in the future.

Budgets for individuals are most effective when done on a monthly basis. Every month, track what money you made and spent, then make appropriate changes moving forward based on your previous spending activity. Spreadsheets help immensely with budgeting, there are also a variety of apps that can assist with your budgeting needs.

Downgrade Your Car

Aside from mortgages, car loans are one of the biggest sources of debt. People tend to purchase cars that are outside of their price range and end up paying hundreds of dollars every month. By downgrading your car, not only will you reduce expensive monthly payments, you can potentially get some money back to help pay down your debt.

Pay More Than Minimum Payments

Making a minimum payment may seem like you’re bettering your debt situation, but in reality, your interest charges are accumulating faster than you can pay your debt. The larger the payments you make, the quicker you’ll reduce what you owe and how much interest you’re accumulating. Keep in mind that you still need to be financially smart and save money for an emergency.

Do you know about the minimum payment trap? Learn here.

Pay Each Balance One by One

If you have more than one debt balance, keep a one-track mind and pay each balance one by one. Paying a little of each balance may seem strategic, but it’s only is strategic if you can afford to make more than the minimum payments. Otherwise, you will only end up paying the interest.

To start, pick the debt balance that has the highest interest rate and largest balance to get the big debt out of the way first. From there, you can work your way down to being debt-free.

Seeking Professional Help to Pay Down Debt

If you are struggling to manage your finances and debt on your own, there are a number of products and services available to assist you. Before seeking professional help, be sure to consider the intensity of your financial situation because each product and service caters to different levels of debt.

Debt Consolidation Loans

If you are in a situation where you owe money to various sources, consider a debt consolidation loan. A debt consolidation loan will combine all your debt into one large loan by paying off your existing debt with the new money. By consolidating your debt into one loan, you will only be managing one balance which is much less stressful.

Often, debt consolidation loans come with lower interest rates too which is a bonus. Interest rates can be reduced further if you use collateral to secure the loan, such as your house. It is important to remember that by using your assets as collateral for the loan, you are risking the asset being seized.

It will be necessary to continue to control your spending habits with a consolidated loan. The loan does not better your financial situation on its own, it just makes it simpler for you to manage.

Debt Consolidation Programs

Similarly to debt consolidation loans, debt consolidation programs combine your debt, but only your unsecured debt. Credit card debt, payday loans, overdue bills, and unsecured lines of credit are all examples of unsecured debt.

Once you have enrolled in a debt consolidation program, you will work with a counsellor to create a plan of action for your debt. With your counsellor, you will come up with a reasonable monthly budget and a complete schedule for how you will repay your creditors. Each month you will send money to your counsellor and they will pay creditors on your behalf.

These programs are ideal for people who don’t have ample secured debt and are seeking confidential support for their unsecured debt. This service reduces harassment and stress from creditors as well as avoiding liquidation of your assets. You are still required to manage your spending habits with these programs and there are often associated service fees.

Debt Settlement

When you choose debt settlement you will work with a debt settlor who will collect monthly payments from you. Once the debt settlor has collected enough money, they will contact your creditors to negotiate a lower, but immediate, payment of your debt. The idea is that creditors want to get some form of payment now instead of nothing or having to wait.

For a more detailed look at debt settlement, check out this article.

Typically, the debt settlor will take a flat fee or percentage of the debt as payment for their services. Debt settlement can be risky because you cease paying the creditors directly for a period of time until the negotiations start. If you are only a few months behind on payments, debt settlement can negatively impact your credit score since you’re stopping payment entirely.

On the other hand, if you are already way past being a couple months behind on payments or your accounts have been sent to collections, debt settlement may work for you.

Consumer Proposal

If your debt has reached a point where it is basically impossible to deal with and you’re facing legal consequences, a consumer proposal could be the solution you’ve been looking for. That being said, a consumer proposal is an extreme option that will have long-lasting effects on your credit score. Be sure to seriously consider if this option is right for you before moving forward.

Learn what happens to your debt with a consumer proposal. Click here.  

With a consumer proposal, you’ll be working with a licensed insolvency trustee who is an Officer of the Court and will create a legally binding repayment of debt proposal between you, the consumer, and your lenders. If your consumer proposal is accepted, you will be eligible for a reduced balance and interest rate, in addition to a “stay of proceedings” which means that lenders are required to stop contacting you to collect the debt.


If you are in a situation where your debt is completely unmanageable, your only choice may be to file for bankruptcy. Bankruptcy is the legal term for when an individual or business cannot repay their outstanding debts. It is important to note that filing for bankruptcy should be a last resort as it is a drastic choice that has adverse, long-term effects on your credit.

As with a consumer proposal, you will be working with a licensed insolvency trustee who will create an agreement freeing you from debt including a stay of proceedings. Creditors are notified when an individual owing them money is in the process of declaring bankruptcy to give them an opportunity to make a final claim.

The Road to Becoming Debt Free

If you are in the midst of becoming debt free, do your best to remain positive and remember that you have options to help you achieve your goals. Always remember that you are not alone, there is professional help available and strategies to help improve your spending habits and financial situation. If you aren’t sure what options are best for you, Loans Canada can assist you in choosing the right solution for your debt situation.

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Posted by in Debt
Veronica is a freelance writer who specializes in creating unique and educational personal finance content. She has extensive experience writing blog posts for companies in the financial sector. Veronica's background is in accounting as she graduated from Western University in 2017 with a degree in accounting. She is passionate about using her accounting expertise to help others with their personal finance questions and issues and enjoys using her writing to educate Canadian readers. When Veroni...


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