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Debt be gone!

​The fastest way to feel more secure about your financial situation is to reduce, or completely eliminate, your debt. But this isn’t what most Canadians do. In fact, consumer debt is on the rise, with debt-to-income levels at an all-time high. And if that isn’t frightening enough, two-thirds of Canadians 18–34 would find themselves in trouble if their paycheque was delayed by only one week, according to a September 2009 survey by the Canadian Payroll Association.1

 

Credit cards

If you have credit card debt, the first thing to do is get it under control. Once you have it under control, it’s time to look at ways to pay it down. There are some options available. Often it’s the interest rate credit cards charge, not the actual charges you put on the card, which will cause you to go into debt. If you are a good customer, with a good repayment record, you can call your credit card company and request a lower interest rate be applied to your balance. There are no guarantees that they will offer you a lower rate, but it never hurts to ask.

Mortgages

Did you know that some debt can be good debt? Good debt is debt that allows you to benefit from ownership or equity. For example, a mortgage would be good debt, as you have the chance to build up equity in the value of your property as home prices increase over the long term. If you have mortgage debt, it is always good to pay it down, but it does not necessarily have to be your first priority in decreasing your debt load.

Home equity

As you acquire equity in your home, you may want to access that equity for a variety of reasons. If you access the equity in the form of “good debt,” that is for the purposes of increasing the value of your home through upgrades or an addition, then it may be a good idea. It is always smart to talk to a financial professional before tapping into the equity in your home to ensure that it is a good financial decision.

 

> Did you know…?
  • There were an estimated 37 million debit cards and 72 million credit cards in circulation in Canada in 2009.
    (Source: Euromonitor International, January 2010)
  • Total outstanding credit card debt hit $78 billion in September 2009, up from $76 billion in September 2008, according to Equifax Canada.
    (Source: Toronto Star, December 2009)
  • Ninety-day credit card delinquencies jumped 53 per cent between September 2008 and September 2009, hitting $3.6 billion. Among major cities, Toronto has the nation’s highest delinquency rate (2.14 per cent) in October. The average national rate is 1.67 per cent.
    (Source: Toronto Star, December 2009)
  • Canadians spent almost $267 billion on their cards in 2008.
    (Source: Toronto Star, December 2009)

 

References:

http://www.ctv.ca/CTVNews/Canada/20100216/household_debt_100216/

 1 Source: http://canada.creditcards.com/credit-card-news/canada-credit-card-debit-card-stats-international.php.