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Lessons in debt control – consolidate to save

A talented juggler can keep four, five, even six balls in the air at the same time and make it look easy. Many Canadians juggle six or more types of debt – often including high-interest credit cards – and must make multiple payments each month. Keeping all of those ‘debt balls’ in the air isn’t easy and it can cost you.

A more efficient way to manage your time and money could be debt consolidation.  

You can reduce the interest costs for car payments, education loans, lines of credit and other high-interest loans (such as credit cards) by consolidating them within a single loan with a lower interest rate. You can then choose how to pay it off:

  • Maintain your ‘pre-consolidation’ payment amount
  • Keep your ‘pre-consolidation’ amortization

Simple is usually better – and less expensive. Debt consolidation can be a simple way to reduce the cost of your debt.

Here are a few other suggestions for managing debt:

  • Consolidate through a home equity loan that offers a much lower interest rate
  • Keep amortization to a reasonable timeframe (within five years)
  • Don’t assume a line of credit is a good thing. A line of credit can spell trouble for people who have trouble sticking to a budget and often have little money left at the end of the month to apply to their debt.
  • Control your debt by cutting up all your credit cards – except for one that you keep only for emergencies.
  • If you are using a debt counseling company, be sure the company is reputable and focused on your best interests.

Debt consolidation can be an important part of a debt management plan.  Speak with a professional advisor to ensure your plan works for you and to get advice on how to create a longer-term financial plan that fits with your improved debt control and cash flow to help you achieve all your life goals.

Date reviewed: September 30, 2015

This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), and Investors Group Securities Inc. (in Québec, a firm in Financial Planning) presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.