Your Money Matters

July 2012 Issue



Mistakes in dealing with Debt

A Manulife Bank survey found that many Canadians are not taking advantage of strategies that would help them overcome barriers to reduce their debt faster. They include:

- 4 in 10 Canadians (43%) do not plan to consolidate their debts at a single low interest rate. Consolidating debt is an easy way for people to get out of debt faster by6 ensuring more of their monthly payments are going towards the debt principal instead of interest costs.

- Among respondents to the survey with a mortgage, 70% did not make any extra payments on their mortgage in the past year. According to the Financial Consumer Agency of Canada’s online calculator, if a person with a $200,000 mortgage (25 year amortization,4% interest rate, monthly payments) increased their payment by $100 per month, they’d save more than $17,000 in interest and pay off their mortgage almost three and a half years sooner.

- Two-thirds of homeowners (65%) did not compare mortgage products from more than one lender the last time their mortgage came due – an easy-to-implement strategy that can result in greater flexibility.

- More than half of Canadians (55%) do not plan to work with a professional advisor to get advice on how they can more effectively manage their debt, and fewer than six in 10 Canadians (56%) have or intend to create, a debt repayment plan that includes a specific date for whey they expect to be debt free.

The overall message is that Canadians should be creating a plan to pay down debt faster. Talking to us to help you look at ways to reduce debt, so you have more to save for the future is a good start. Please call us if you or any of your family members need some help. Thank you again for your continued trust.

Source: The above survey was conducted by Manulife Bank of Canada. The poll survey 1,000 Canadian homeowners from ages 30-59 with household income of more than $50,000. It was conducted online by Research House between October 25 and Nov 7, 2011.

Theresa Wever and the Money Concepts Team

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