The period of low interest rates is coming to an end. According to current forecasts, the rates will start rising midway through 2010. For many Canadians who went on holiday shopping sprees, stretching their credit limits to the max, the rise could spell sudden difficulty or disaster.
The Bank of Canada has warned that the biggest risk to the country's financial system is record household debt. Canadian households spent an average $71,360 last year, two per cent more than 2007. Approximately 20 per cent represented housing expenses.
As many Canadians wish to unload their mortgages as soon as possible, they are struggling to meet payments due to accelerated pay-downs on principal. Combining these high payments with other debts has put a stranglehold on many consumers.
It is crucial to take control of your debts before they control you. Experts suggest developing a plan of action to tackle your debts before problems arise.
It may be wise to suspend accelerated pay-downs on your mortgage. Use the extra cash from the lower mortgage payments to tackle the credit cards and other debts. Refrain from adding debts to your cards while you reduce the balances. Remember that higher unpaid balances carry higher rates of interest. It may also be advisable to take a consolidation loan at a lower rate of interest and pay off the cards. Also, try not to use more than one or two credit cards.
Sometimes, debts can get the best of us. Don't be afraid to seek help from credit counselors, if you feel that you are beginning to drown in debt. These professionals can help you before you panic and assist you in gaining control of your financial situation.
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