Got debt? If you do, it might be stressing you out.
Whether you're using a credit card to cover additional COVID-19-related expenses, to make up for reduced income during the pandemic, or you’re trying to make progress towards paying off your existing debt, you might be feeling overwhelmed about repayment.
But luckily, there are some easy ways to reduce your interest costs and modify your payments to get out of debt faster.
Here are 3 of the simplest ways to supercharge your debt repayment:
1. Consider consolidating or restructuring your debt
If your debt is primarily on your credit card, you're likely paying a higher interest rate on your balance. Consolidating your credit card debt and other high interest credit balances, into a new loan or line of credit at a lower interest rate, can help you reduce how much you're paying monthly, and should allow you to pay off your debt more quickly. Below are some options to consider.
A. Debt consolidation
Debt consolidation is when you complete a new credit application to combine multiple debt balances, into one new credit product with a lower annual interest rate and one lower payment.*
B. Restructure existing credit limits
Alternatively, you could also do a credit restructure by combining the limits of multiple Scotiabank credit cards and/or lines of credit into a new or existing credit product that can result in a lower annual interest rate and one lower payment without having to complete another application. In this scenario your new credit limit cannot exceed the sum of the previous credit limits.*
C. Transfer your balances
Move your debt to a new or existing secured or unsecured line of credit.
A line of credit might allow you to access a lower interest rate than credit cards and loans – especially if it is a secured line of credit like a home equity line of credit (Scotia Total Equity Plan).
A line of credit is similar to a credit card in that it is a revolving line of credit which allows you more flexibility in how much you pay back every month so long as you make your minimum payment each month. This is especially helpful if you are struggling to make regular payments on your debt or have fluctuating income. The lower interest rate will also save you money on interest over the course of your repayment.
D. Switch to a lower interest rate credit card
Another thing to consider is whether you can save money on interest by switching your credit card and its balance from one with a higher interest rate to a credit card with a lower interest rate. Currently Scotiabank offers the Value Visa credit card with an annual interest rate of just 12.99% on purchases and cash advances, for a low annual fee of $29. **
2. Focus on repaying your higher interest debt
Once you've figured out which one of the above payment reduction options works for you, you may want to focus the new extra cash flow you have on the repayment of your other higher interest debt.
Why? Doing so will help you to pay off your debt faster by minimizing the amount of accumulated interest over the life of your loans.
3. Stay on top of your payments
One of the best ways to ensure you don't get behind on your payments is to automate them through digital banking and receive alerts about them.
The first step you should take is to sign up for Scotia InfoAlerts. These alerts will help you stay on top of your credit card, line of credit and other monthly loan payments. When you sign up, we'll send you a notification before the due date for your minimum payment and after you've missed a payment. We'll also let you know once your payment has been received.
To make it even easier, set up automatic transfers to your loans, lines of credit and credit cards each month. Automating your payments can prevent you from paying late payment fees. Transfers are easy to set up via Scotia Online or Mobile banking. You can also visit a branch to get help setting it up from a Financial advisor. Make sure to also visit Scotiabank’s Bank Your Way hub to learn more about how you can make payments digitally.
Create a plan
Refinancing and automating your debt repayment are easy ways to stay on top of your repayment and save money. If you need other support to manage your debt repayments during COVID-19, we have a number of options available for customers.
Having a clear plan for how you will manage your repayment and knowing what options are available to you are two great ways to reduce your worry, get out of debt more quickly, and create more peace of mind during this difficult time.
* You must meet eligibility requirements to consolidate their debt, restructure credit and switch their credit card; contact your Branch (Find your local branch today through our Branch Locator)
** All rates, fees, features and benefits are subject to change.
Legal Disclaimer: This article is provided for information purposes only. It is not to be relied upon as financial, tax or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article, including information relating to interest rates, market conditions, tax rules, and other investment factors are subject to change without notice and The Bank of Nova Scotia is not responsible to update this information. All third party sources are believed to be accurate and reliable as of the date of publication and The Bank of Nova Scotia does not guarantee its accuracy or reliability. Readers should consult their own professional advisor for specific financial, investment and/or tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.