How to improve your debt ratio?

The quickest way to reduce your debt ratio is to tackle your debts head-on. Here are some improvements that can help you achieve your goal.



The debt ratio takes into account 3 elements:

  1. Housing expenses.
  2. Gross income.
  3. Monthly debt payments.

Therefore, the only way to improve your debt ratio is to either reduce your housing expenses, increase your income, reduce your debts, or a combination of these 3 factors.

It may be difficult to reduce the cost of rent or mortgage and/or increase your income in the short term. Therefore, the quickest way to reduce your debt ratio would be to reduce your debt load. Below, you’ll find some tips that can help you achieve this.

5 Steps To Improve Your Debt Ratio

Here are 5 crucial steps to reduce your debt ratio:

  1. List all your debts.
  2. Sort your debts.
  3. Negotiate with your creditors.
  4. Consolidate debts.
  5. Avoid new debts.


Let’s go through each step together in detail to help you improve your debt ratio:

  1. List all your debts: Start by assessing your overall financial situation. Compile a detailed list of all your debts, including their interest rates, monthly amounts, and due dates.
  2. Sort your debts: Prioritize paying off debts with higher interest rates (typically your credit cards), as this helps reduce total costs in the long run.
  3. Negotiate with your creditors: If you’re struggling to repay your debts, contact your creditors to negotiate a lower interest rate or an agreement with reduced payments over a longer period. A good payment history and a clear explanation of your financial situation could help you secure more favorable terms. Financial institutions may offer credit cards with reduced rates to qualifying customers. The key is to never default on payments.
  4. Consolidate debts: Explore the possibility of consolidating your debts. This consolidation can be done through a personal loan, mortgage refinancing, or a consumer proposal. This can simplify repayments and, in some cases, reduce interest charges.
  5. Avoid new debts: While trying to reduce your debts, do not incur new ones. Limit the use of your credit cards or, better yet, put them out of reach and focus your repayment efforts on your existing debts.

Optimizing Your Budget To Improve The Debt Ratio

The following points provide you with effective budget optimization strategies to help you improve your debt ratio and regain control of your financial future:

  1. Prepare a realistic budget: Prepare a budget that accurately reflects all your monthly expenses, including debt repayments. Identify areas where spending reductions are possible and apply these savings to debt repayment.
  2. Reduce unnecessary expenses: Identify and reduce or eliminate some unnecessary expenses such as monthly subscriptions to media platforms, restaurant meals, impulsive purchases, etc. Redirect these savings towards debt repayment. However, keep in mind that if the required efforts are too drastic, it could be difficult to maintain in the long term. Therefore, it’s better to opt for moderate but consistent efforts over time.
  3. Increase your income: Explore the possibility of increasing your income, whether through overtime, a part-time job on weekends, selling stuff you don’t need anymore, or even finding a better-paying job. However, be careful not to over-exert yourself and make sure this is a temporary situation to repay your debts more quickly! Never rely on this solution to make ends meet on a permanent basis, as it could lead to exhaustion, worsening your situation.

Make More Informed Decisions

In-depth knowledge of personal financial management could help you make more informed decisions, avoid financial pitfalls, and maintain a healthy financial balance in the long term. Many financial institutions offer interesting articles online that provide a variety of useful tips and advice. You might be surprised and learn many things that will save you a lot of money and headaches.

Every situation is unique, and the advice from a brother-in-law who did well for himself may not necessarily apply to your situation. Don’t hesitate to consult a professional in the field of personal finance who has the skills and, most importantly, the perspective to answer all your questions and provide you with an objective point of view.

By following these tips to improve your debt ratio and using the various tools available to you, you can gradually reduce your debts, regain control of your financial situation.

For any questions or concerns regarding your debt ratio, our financial advisors will be happy to analyze your financial situation for free and explain possible solutions to your debt.

By Pierre Fortin
Jean Fortin & Associés
Personal Finance Advisor
Licensed Insolvency Trustee