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.