Is Debt Weighing You Down?
As governments around the world have been increasing interest rates this year, many Canadians are struggling with debt and the higher interest rates. If you're one of them, don't worry – there are steps you can take to reduce your debt and minimize the impact of high interest rates on your finances. Here are 6 ideas to focus on if you or someone you know is in this situation!
Consolidate your debt - If you have multiple debts with high interest rates, such as credit cards or personal loans, consider consolidating them into one lower-interest loan. This can make it easier to manage your debt and reduce the amount of interest you pay over time.
Prioritize high-interest debt - If you can't consolidate your debt, focus on paying off the debts with the highest interest rates first. This will help you save money on interest charges and reduce your overall debt load more quickly.
Negotiate with your creditors - If you're having trouble making payments, consider contacting your creditors to negotiate a lower interest rate or a more manageable payment plan. Many lenders are willing to work with borrowers who are experiencing financial difficulties. This has actually been the case for certain mortgages as well. Some individuals have negotiated with their mortgage lender to limit further increases in payments even when they have a variable rate mortgage. Of course in this scenario it will extend your amortization, but I have heard this happen.
Build an emergency fund - Having an emergency fund can help you avoid taking on more debt in the future. Aim to save enough to cover three to six months' worth of living expenses, so you have a cushion in case of unexpected expenses or income loss.
Consider a balance transfer credit card - Some credit cards offer promotional periods with low or zero interest rates on balance transfers. If you can qualify for one of these cards, transferring your high-interest debt to a lower-interest card can help you save money on interest charges.
Seek professional help - If you're struggling to manage your debt on your own, consider speaking with a financial advisor or credit counseling agency. They can provide guidance on debt reduction strategies and help you develop a plan to get your finances back on track.
High interest rates can make it challenging to manage debt, but with a few simple steps, you can reduce your debt load and minimize the impact of interest charges on your finances. Remember, reducing your debt and improving your financial situation takes time and effort, but it's worth it in the long run. If you have any questions about your situation or any debt that you have, feel free to reach out - I'd love to offer some personalized guidance.
Financial Advisor | CFP, B.Eng