According to Credit Canada, the average consumer debt for a two-person household in this country is more than $41,000, excluding mortgages.
When you’re in debt, it may be tempting to use your credit card more often or take out a loan. However, short-term money options may worsen your financial situation. Avoid these eight money traps to stay out of debt!
Payday loans may get you through to your next payday, but these loans carry high-interest rates and hidden fees. You may end up paying interest of almost 400 percent. Many borrowers fail to repay the loans on time and end up in an unending debt cycle. Read more about the predatory nature of payday loans.
Credit cards are convenient when used cautiously. However, using plastic has risks such as running up debt, missing payments and incurring high interest charges when not handled correctly.
Debt consolidation loans may provide an opportunity to pay off old debt if done correctly. However, some loans come at a higher interest rate than you’re currently paying. You also risk racking up new credit card debt to manage in addition to your consolidation loan payment.
Unnecessary insurance is a money pit many consumers fall into. Consumers often consider insurance and extended warranties an investment but rarely see any direct benefit. For example, permanent life insurance is an expensive type of insurance many average Canadians buy but don’t need.
Adjustable-rate mortgages are high-risk because interest rates and payments may change significantly over the course of your loan.
Car leases have advantages for some car owners and businesses. However, leasing instead of buying means you’ll be trapped in a cycle of monthly payments without ever owning an asset you can sell or trade.
Timeshares decrease in value as soon as you buy them and are hard to sell because the market is saturated with them. Plus, like car leases, you never own the physical property but must still pay maintenance and other fees.
Private student loans or lines of credit leave many graduates under a mountain of student debt, with the average Canadian student owing more than $26,000. Government student loans usually have lower interest rates than private financial institutions. Also, students should seek out available grants, scholarships and bursaries.
NEED ADVICE? WE PROVIDE DEBT HELP IN OTTAWA AND ACROSS EASTERN ONTARIO
At D. & A. MacLeod Company Ltd., we can help you manage your debt and re-establish your credit score. Our credit counselling service can help you stay out of debt. Contact us today to book a confidential appointment with one of our licensed insolvency trustees and start your journey to financial freedom.