Debt can add up quickly whether it is from unexpected costs, or from not tracking how much you spend.
Across Canada, personal debt is growing. It is reported that Canadians owe around 1.78 for every dollar of their disposable income.
Managing debt and keeping it under control is easier said than done. These Do’s and Don’ts of Debt Management can help. If you have tried these tips and are still facing large debts, call us today at 519-310-5646 for a free consultation.
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Debt is a normalized part of life. While you actually need it to build your credit score, it can be a slippery slope that can get you in trouble too. It’s important to manage it properly so it does not spiral out of control. Here are some Dos and Don’t to get you started.
- Don’t just look at the interest rate. Finding the best loan is about more than just finding the lowest interest rate. Check out all of the fine print, including red flags like prepayment fees or pricey insurance add-ons.
- Don’t borrow from high-interest money lenders i.e. payday loans. Payday loans and the like have extremely high-interest rates (upwards of 400%) plus fees. They must be repaid in a short amount of time and can quickly land you in a spiral of debt.
- Don’t go for consumer debt. Consumer debt is considered ‘bad’ debt. It involves the purchase of items that do not appreciate and as a result, it does not build your credit score.
- Do go for ‘good’ debt. Conversationally ‘good’ debt is debt that appreciates. For instance the purchase of a home or an education.
- Do pay off your credit debts in full at the end of each month. Make sure that your credit cards and/or your line of credit are paid off at the end of each month in full in order to avoid interest. As a result, don’t spend more than you can repay monthly.
- Do pay your debts back on time. From loan to credit cards, all debts have fees for missing or paying late. Create a bill payment schedule so that you will never miss a payment date.
- Do seek help. Speak to a financial professional before you sign on the dotted line to incur any debt.
To speak further about the Dos and Don’t of borrowing, speak with one of our Licensed Insolvency Trustees!