Low Interest Rates Good Reason to Lower Debt

Low Interest Rates Good Reason to Lower Debt

Low Interest Rates Good Reason to Lower Debt

In a press release on February 6, 2015 Lucie Tedesco Commissioner Financial Consumer Agency of Canada stated that just because interest rates have gone down, referring to the recent Bank of Canada decision to lower the overnight rate, does not mean that Canadians “should take on more debt.” In fact the low interest rates good reason to lower debt.

 

Low Interest Rates Good Reason to Lower Debt
picture courtesy of the Financial Post

To many mortgagers (owing money borrowed on real estate) or those with loans whose payments are calculated based on the Prime rate, which in turn is calculated on the Bank of Canada’s overnight rate, low interest rates can be a double edged sword. Especially if you can’t control your spending; however if you are able to curve your appetite for borrowing, then for you low interest rates good reason to lower debt as you can pay more towards your principal and less towards interest payments.

Commissioner Tedesco went on to say that “Canadians should look at this low interest-rate environment as an opportunity to pay debt down, rather than to accumulate more, even for a larger house, a newer car or a winter vacation.” We should be realistic and be ready for when interest rates will increase.

For its part the Financial Consumer Agency of Canada has developed tools and resources to assist the consumer with managing their debt obligations and can be found at “How to Beat that Debt.”

To read the full press release from Lucie Tedesco Commissioner Financial Consumer Agency of Canada click here.

Trusterra Mortgage is here to help. If you currently have a mortgage and are considering to consolidate your debt, or want to get the lower interest rates that are available currently, contact us to see what options are available for you and we’ll assess your current financial situation to see whether it is worth it for you to break your mortgage to refinance it or not.

how many credit cards

How Many Credit Cards

How Many Credit Cards is too many credit cards?

How many credit cards do you have? Are you the type of person who is good in controlling him or herself when it comes to spending with credit cards, or do you fill out every credit card application at every retailer for the sake of getting the gift that comes with it?

There is such a thing as having too many credit cards. Everyone should ask themselves how many credit cards they really need. In reality, you really need one or two credit cards; perhaps one Visa card and one MasterCard or American Express card. Most retailers, online shops, and other merchants accept Visa and MasterCard, so if you have one of each card you’re pretty well covered everywhere you go to buy things.

How many credit cards you need? We suggest no more than two. Here are some disadvantages of having too many credit cards:

  • The likelihood of losing a card can increase by having too many credit cards.
  • If you are not good with controlling your spending, you can easily max out on your credit cards.
  • Maxing out on credit cards is not healthy for your credit rating as your credit score will start to drop.
  • When time comes to apply for a loan, having too many credit cards can raise a red flag for the person or institution who is considering lending you money.
  • Having too many credit cards can create challenges in managing them and paying their balances on time each month, which in turn will negatively affect your credit rating.
  • Every time you apply for a credit card your credit report will take a hit; meaning, the credit card company has to check your credit report to make sure everything is good before they accept your credit card application. That hit to your credit report can affect your rating.

how many credit cards

 

Some people in their efforts of trying to help you out will consider how many credit cards you need based on whether you are newly starting to establish credit or not. That’s fine, but we still think having just two credit cards is enough to help with establishing credit history. Down the road you may, if your income can support it and your track record of paying back loans on time, consider getting a third credit card.

how many credit cards

 

In the context of building and strengthening your credit report and history with the credit bureaus, here is a ‘link‘ to Industry Canada talking about improving your credit score.

Pay Down Your Debts

Pay Down Your Debts

The New Year has started and what better way than to set practical and achievable goals to pay down your debts for this year. Many people build up a lot of debt throughout the year, and to top it all up, by the end of the year during the last month of it, more debt is accumulated due to holiday spending.

It is very important pay down your debts as the more personal debt you accumulate it will put a great amount of stress on your credit score. Your credit score will start to come down through time if you don’t pay down your debts on a regular basis, making timely monthly payments each month without being late. Pay down your debts

It can be a daunting task, especially if your debts are high, but there is light at the end of the tunnel. The first step is to make a personal commitment to yourself that no matter what, you will stick with your plans to pay down your debts.

Next, seek professional help and do lots of research about what resources are available for the consumer on this subject matter. One place that you can start with is the Financial Consumer Agency of Canada.  This Government agency has lots of helpful and useful information and tools about personal finances.

Sit down and evaluate all your debts. Break them down one by one so that you know exactly how much money you owe, and to whom or what financial institutions you have to pay them back to. If you’re running tight with money and don’t have too much to spare, at the least try to set a monthly budget aside to pay down your debts  with the minimal payments that each creditor allows you to make. Ideally you would want to pay back the entire debt; however, sometimes this is not possible to do at the start.

Some consumers might also own their home and have some amount of equity built up on it. Another option for your plans to pay down your debts could be to refinance your home, or use an existing Home Equity Line of Credit HELOC to pay back your high interest loans and then on a monthly basis pay down your HELOC or refinanced mortgage.  Most personal loans have a lot higher interest rate than the average residential mortgage interest rate. Using the equity built up of your home in the form of a HELOC or a new mortgage can save you  from high interest payments.

You can also Contact Us if you have any questions or need assistance with paying down your debts. We will do our best to help or at least to point you to the right direction.

Home buying step by step – Step 2

source: CMHC Canada Mortgage and Housing Corporation

 

Home buying step by step – Are you financially ready?

Home Buying Step by Step – Step 2 Are You Financially Ready

How can you know if you are financially ready to become a homeowner?

This step guides you through some simple calculations to figure out your current financial situation, and the maximum home price that you should consider.

How Much are You Spending Now?

Calculate Your Household Expenses

Start figuring out your financial readiness by evaluating your present household budget. How much are you spending each month? Knowing exactly how much, will give you a better idea about whether you can afford to become a homeowner.

The Current Household Budget worksheet helps you take a realistic look at your current monthly expenses.

Or, you may also use the CMHC Household Budget Calculator to complete your current household budget now.

Please visit the CMHC to continue with your affordability calculations, which include such things as:

Calculating Your Monthly Debt Payments

Calculating Your Total Monthly Expenses

and many more tools that were help you determine your affordability levels and how much you can afford to borrow.