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What you need to know about debt (and how to pay it off)

It pays to pay attention to interest rates…especially when it comes to your high-interest debt payments.

Teaching the fundamentals of interest rates might be part of the financial literacy curriculum you cover with your students. Yet it seems most Canadians could use a crash course on that very subject. Just take a look at these statistics:

  • 41% of Canadian credit card holders are unaware of the interest rate charged by their main credit card company (according to the Financial Consumer Agency of Canada)
  • Consumer debt in Canada (excluding mortgages) has risen year over year by 2% (according to the Canadian credit reporting agency Equifax)
  • In seniors (ages 65 and older), debt loads have increased by 4.9% in just one year (Equifax)
  • This means the average Canadian now holds approximately $21,164 in debt over and above their mortgage—and this number is projected to climb over the next five years

With credit card rates as high as 20% or more, ignorance definitely isn’t bliss when it comes to debt payment.

While it takes very little time to rack up thousands of dollars in debt—high-interest rates can make the process of paying that debt off painfully long. Yet worse than getting highly indebted in the first place is not exploring your options for digging yourself out of debt.

Tip #1: Shop around for lower interest rates—an instant way to put more money towards the principle.

Over the years, Educators Mortgage Agent Level 1 – Mortgage Specialist Nick Rao has helped many education members that have fallen into the high-interest debt trap—and the first step to getting it paid off is as simple as being aware of your options.

“The average bank credit card charges 14% interest, while the average department store credit card charges 20% interest or more,” says Nick. “With those kinds of interest rates, many people feel like they’re spinning their wheels when it comes to paying off debt. However, if you’ve paid your bills on time and have a good credit rating, there’s no need to pay these exorbitant rates. Call your bank and tell them you want a lower rate. If they don’t give it to you, call somewhere else—or better yet, call Educators Financial Group. Just like when it comes to shopping, sometimes the only way to get a bargain is to not be afraid to negotiate.”

Tip #2: If your debt load stretches across multiple cards and loans—consolidate.

Having one high-interest debt payment is bad enough. Having two or three can feel like you’re up debt creek without a paddle. In some cases, it may even be deciding “which bill gets paid this month” or simply making the minimum payment. If this sounds like how you’ve been handling your debt load, then it’s definitely time to consolidate!

Nick adds, “By consolidating your high rate credit cards and personal loans into one low-rate option, you can seriously save yourself a bundle.”

3 more quick tips for paying down debt:

  1. Pay off small balances first—you’ll have the satisfaction of making progress sooner (which can be positive motivation to keep paying down debt)
  2. Once one card/loan is paid off, don’t spend that minimum monthly payment you used to pay every month—instead put that newly freed up money towards doubling up on your next smallest balance to pay it off even faster (think of it as creating a debt-paying snowball effect)
  3. Create a debt payment plan/timeline—this will enable you to monitor your progress and ensure your goal to pay off your debt stays on track

Need help managing your debt? Call on Educators Financial Group.

From pay grids to pension plans, Educators Financial Group understands it all. That’s because we’ve provided financial advice exclusively to education members since 1975. If you’re looking to pay off your debt sooner, call on us. We’re here to help.

Let’s talk about debts: have one of our mortgage agents contact you.

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