The Learning Centre:
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: Shop around for lower interest rates—an instant way to put more money towards the principle.
Over the years, Educators Director, Lending Services Amedeo Perfetto 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 Amedeo. “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: 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! Amedeo adds, “By consolidating your high rate credit cards and personal loans into one low-rate option, you can seriously save yourself a bundle.”
Click here to learn more about low-interest lines of credit through Educators Financial Group.
3 more quick tips for paying down debt:
- Pay off small balances first—you’ll have the satisfaction of making progress sooner (which can be positive motivation to keep paying down debt)
- 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)
- 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
You’ve got high-interest debt? We’ve got low-rate options to help you conquer it.
If you feel like you’re drowning in high-interest debt, think of Educators Financial Group as your low-interest life preserver. With loans and lines of credit at super low rates reserved exclusively for the education community—we can set you up with the right low-rate lending solution to get you saving money and paying your debt off sooner.
Let’s talk about debts: click here to have one of our lending specialists contact you.
The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering of tax, legal, accounting or professional advice. Please ensure to consult your accountant and/or legal advisor for specific advice related to your circumstances. Educators Financial Group will not be held responsible or liable for any losses, costs, damages or expenses incurred by reason of reliance as a result of the aforementioned information. The information presented was obtained from sources that are believed to be reliable. However, Educators Financial Group cannot guarantee their completeness or accuracy.