Consolidating Your Debt
When considering your debt there are 2 options:
- Debt Management – Managing your debt and maintaining a strict budget
- Debt Consolidation – Roll all your outstanding debts into one payment
Getting into debt is easy but getting out of debt can be hard. The first step in paying off your debts is identifying what you owe, such as student loans, lines of credit and credit card balances. Once you know what you owe, you can include debt payments into your monthly budget.
Tips for Debt Management
- Review your budget carefully to see where you can cut expenses.
- Try to pay off your debts with the highest interest rates first, such as credit card debt.
- Use FCAC’s Credit Card Payment Calculator Tool to see how to pay off your credit card debt faster.
- Aim to pay your credit card balance in full every month. If you can’t, always make at least the minimum payment on time to avoid additional fees or rate increases and to make sure your credit rating is not affected.
- If you have high-interest loans, consider consolidating them into a low rate option, such as a line of credit.
- If you are having trouble managing your debt, stop using your credit cards and other credit products until you have reached your debt repayment goal.
- If you are carrying a balance, make your debt payments as early as possible to reduce interest charges—don’t wait until the due date. Check your contract to confirm there are no early payment penalties.
Debt Consolidation Example
You’re looking at your T4 slip from last year… or maybe your most recent pay stub. Tax time is especially sobering; you can see how much money you made… but your credit card is still maxed out and you don’t have much to show for a year’s income.
Industry Canada, which monitors consumer data, reports interest rates for department store credit cards as high as 28%. Even competitive-rate credit cards will often run at 18% or more.
Consider this, if you have equity in your home, you can take advantage of attractive mortgage rates to save a bundle on interest charges. Compare current mortgage rates with the rates charged on your other debts.
Consolidating all your debt into one mortgage payment, it not only a wise financial strategy, but will help you to keep life simple.
|Mortgage (at 6%)||$160,000||$1024|
|Penalty to Break Mortgage||$1,500||—–|
|Mortgage (at 4.95%)||$160,000||$1024|
|Penalty to Break Mortgage||PAID||—–|
|Additional Monthly Savings||$904|
This example shows how obtaining a new mortgage can result in savings of over $800 per month!
If you think you can benefit, call us for a review of your situation and our best recommendation.
There is no cost or obligation. If your friends or family could similarly benefit, please extend this same offer.