4 Tips to Manage Your Debt When Interest Rates Rise

Are you feeling the effects of rising interest rates????

Rising interest rates mean that it costs more to borrow money – which includes any debt you already have. In this situation, paying down your debt as much as possible will help you avoid the financial stress caused by higher interest rates.?

Want to pay down your debt, but not confident in how with rising interest rates? ??

Follow these tips to manage your debt ??

Are you borrowing for the right reasons? Know the difference between good debt and bad debt?

Good debt is an investment in something that creates value or produces more wealth eventually like a mortgage on a home, or a student loan.?

Bad debt is debt taken on to buy something that immediately goes down in value or to buy something that you can't repay on time and in full. This could include charges on a store credit card at a high rate of interest or a personal loan to pay monthly expenses?

Keep in mind, though, that a debt may be "good" or "bad" depending on the circumstances. For example, a mortgage is usually considered a good debt because it's an investment in property that is expected to increase in value—but it could be a bad debt if you can't afford the payments.?

Review your budget?

Your budget is a useful tool in helping you manage your money. It helps you figure out how much money you get, spend and save.??

Review your budget to identify where you can cut expenses, so you have more money to pay down your debt.?

If you don't have a budget, now is the time to start: Making a budget - Canada.ca?

Pay down your debt??

Start with the debt with the highest interest rate first so you pay less money towards interest.??

If you need help creating a strategy, try our Financial Goal Calculator - Canada.ca (fcac-acfc.gc.ca)?

Consider applying for a loan to pay off multiple high-interest debts??

This is called consolidating your debts. Consolidating your debts means you will only have to make one monthly payment rather than paying each of your debts individually.??

A consolidation loan or line of credit may help you get out of debt if:?

• it has a lower interest rate than the debts you are consolidating??
• it has a lower monthly payment than all your other debts put together as you can put the extra money toward paying down your debt faster?
• you avoid taking on more debt with the available credit you free up?

Avoid taking on debt in the future?

Save for your financial goals such as your child’s education, a down payment on a house, or an emergency fund to pay for unexpected expenses without going into debt.

To learn more about managing debt when interest rates rise, visit Managing your money when interest rates rise - Canada.ca?

November is Financial Literacy Month! Learn more about managing your money when interest rates rise at Canada.ca/financial-literacy-month.??