Are you at risk if interest rates rise?
(NC)—Here's a new check-up to consider: the debt check-up.
This look at your financial health will help you determine whether you would be able to handle increased payments if interest rates go up. While those rates are now at all-time lows, they will likely rise some time in the future.
"Canadians need to look at how much debt they are carrying, particularly in the amount of their mortgages, home equity lines of credit (HELOCs), personal lines of credit and variable-rate personal loans," says Ursula Menke, Commissioner of the Financial Consumer Agency of Canada (FCAC). For example, a couple with a 3.1% variable interest-rate mortgage of $277,658 could see their mortgage payments increase anywhere from $72 per month (or $864 per year) if interest rates go up 0.5%, to $145 per month (or $1,740 per year) if interest rates go up 1%.
To do a debt check-up, look at your current total monthly payments, and list them on the Debt Check-up worksheet available on FCAC's website, itpaystoknow.gc.ca. Next, talk to your lenders to find out how much your payments could increase if interest rates go up. Then, see if the total would still be within your comfort zone and, if not, consider your options, like consolidating loans, to find ways to have more money available to repay debts and save for your goals.
Other tips that might help you get out of debt are to stop using credit cards and look at ways to save money. Use your debit card or cash to pay for purchases, avoid buying that daily coffee, bring your lunch to work or take public transit.
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