Will you be taking advantage of the recent Bank of Canada Rate Cut to Pay off Debt?Jan 30, 2015
For the past few months, those in the financial industry warned of an interest rate rise on the horizon. Most experts encouraged Canadians to pay off debt, and consider debt consolidation in anticipation of increasing interest payments. However, last week the Bank of Canada surprised everyone by lowering the lending rate.
So how does this news of the lower lending rate change the advice we’re giving too Canadians? In reality, it doesn’t impact that advice at all. It’s still a good idea to deal with debt to reduce debt stress and get finances back under control. The lower interest rate should give you additional encouragement to consider debt consolidation if you are facing debts from multiple sources.
Debt consolidation loans typically have a lower interest rate to begin with. With the recent rate change from the Bank of Canada, there is an opportunity to receive your loan at an even lower rate than years past. This lower interest rate helps to ensure that more of your payment is going towards the principal owing and not just keeping up with the interest.
Even though low lending rates are attractive, it is not a wise time to consider taking on more debt. Consumers may feel more inclined to increase their line of credit, or take out an additional loan for home repairs, purchasing a vehicle, vacations, etc. However, financial experts agree that borrowing more is the opposite of what you should be doing now that the lending rate is cut.
“This is a rate cut that tells you NOT to borrow. Pay down debt in 2015, curb new borrowing, build savings and invest prudently. Identify your family’s financial weaknesses and take steps to fix them. Our Globe and Mail financial boot camp coming up the week of Feb. 9 will offer some help.” Says Rob Carrick of The Globe and Mail.
The moral of the story is that the Canadian economy remains unpredictable. There are number of different factors that are taken into consideration when changes are made to how Canadians can borrow money. Since none of us can truly anticipate how those factors evolve, it is important to take advantage of the opportunities as they come. Use this unexpected change to repay existing debt, save money, and avoid greater stress later.
If you are ready to take control and pay off your debt, speak to a debt help professional about your options. Use our debt repayment calculator to compare different consolidation plans and implement the one what will work best for you.