Homeowners carrying high balances on multiple high-interest credit facilities – credit cards, customer cards and/or unsecured personal loans – might consider consolidating all outstanding debt under one, lower-interest debt consolidation loan or secured home equity line of credit backstopped by their existing home equity. Debt consolidation is one strategy to reduce outstanding debts at a time when growing Canadian household deb-levels is raising concerns.
An editorial in the Vancouver Sun highlights this concern, noting that “Canadians are assuming record levels of debt relative to their income.” In light of the Bank of Canada’s decision to raise its interest rates for a third time this year, the Sun points out that “a modest interest rate increase is a useful reminder that mortgages, lines of credit and credit card debt should never be financed by low borrowing rates that became so low only because of a financial and banking crisis.”
“While American consumers are getting that message,” notes the Sun, which points to growing savings rates amongst U.S. households, “Canadian consumers are still a little eager to take on debt that may not be sustainable if interest rates rise or if the economy dips back into a second recession.”
“Canadians should be cautious,” the Sun admonishes, pointing out that in the U.S. (“the biggest influence on Canadian prosperity”),recent economic data shows that “wages and salaries, corporate profits, industrial production, employment, retail sales and exports are all down from their highs . . . long after the American recession was supposed to have ended.”
Through debt consolidation, Canadian homeowners who have saddled themselves with multiple credit card, store credit card, and/or unsecured personal loans, can address the financial liabilities that could put them at risk when – not if – interest rates inevitably rise.
