Bank of Canada governor, Mark Carney, recently warned us that interest rates could be rising sooner than most had previously expected. This will affect indebted consumers who have been getting by with barely paying down their debts even with very low interest rates.
Canadians have been handling their debt loads differently lately by moving it from credit cards to cheaper lines of credit and securing it to their home through Home Equity Lines of Credit (HELOC) (see OCCA Blog about HELOC). No matter how smart we think we’ve been in moving our debt, the trend has not stopped overall, non-mortgage debt from increasing, according to Equifax Canada.
Credit card debt may have fallen to $7,884 in the first quarter of 2012 on a per person basis, however, non-mortgage debt climbed to $1.138-billion, up from $1.099-billion a year ago. That translates into average non-mortgage debt per person jumping to $15,206 from $14,463 a year ago!
Those of us who have dumped credit card debt on their homes, and have not locked in their mortgage rates may be in a nasty predicament when interest rates increase. Some are already over their head in debt and, should they not be able to pay off their debt, will need to sell their home to pay off their VISA. On top of that, some Canadians who have taken a HELOC or line of credit (secured to their home) do not have enough equity in their home to pay off their debt from the sale of their home. Can you say risky?
Here is the reality. We all have bills to pay and debt of some kind to manage. It’s impossible to go through life without some kind of life changing event, like a job loss, an illness, and divorce, the loss of a loved one or just plain old inflation. These events will make it harder for us to manage money and maintain financial balance. It can lead to debt trouble. How you handle debt trouble can also be a life changing event.
The best way to pay off your debt is to NOT borrow. If you can pay off all of your debt as quickly as possible without borrowing, great! Congratulations on being on top of managing your debt! For most of us, however, it simply cannot be done. It’s hard to keep up with the arrangements you’ve agreed to with creditors when you can’t afford to feed your family or make your rent/mortgage payments. Instead of continue to slave away at making the minimum payments, take charge and consult a professional debt relief firm. A registered and credible debt relief firm will assess your finances and offer a repayment plan you can afford.
For more information about how to take charge of your debt, call OCCA Consumer Debt Relief toll free at 1-866-USE-OCCA or visit www.occa.ca.
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