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Till debt do you part, looking for love in all the wrong places?

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Till debt do you part, looking for love in all the wrong places?

Dating can be complicated, especially later in life. You’re probably carrying some extra baggage, which can come in many forms. And, there still might be an ex in the faded picture, as well as children and grandchildren. It can be a difficult world to navigate.

When you’re younger there are any number of reasons of why you might fall for someone. But, when you’re older, you’re hopefully a lot wiser too. In addition to emotional baggage, financial baggage could be holding you back from finding the perfect partner. A personal finance website called Finder, found that 68.5 per cent of Canadian adults say that they would reconsider a relationship based on a person’s financial debt. Baby boomers might be a tad more savvy, as 70 per cent of those surveyed would consider their partner’s debt unacceptable and a roadblock for the relationship to continue.

Deal breaker

Some debt is considered worse than others. The Finder survey found that payday loans were viewed as the least acceptable form of debt. More than 58 per cent of Canadians said that if they found out that their partner was carrying this type of liability, then it would be a deal breaker for them. Pay day loans have notoriously high interest rates, and are often used as a last option to get funds.

Other types of debt that may have your love interest rethinking, also include credit card debt, and money owed to family and friends.

Acceptable debt

Angus Kidman is the editor-in-chief at Finder and he says, “The uncomfortable truth is that the majority of Canadians are turned off by personal debt. Given so many people in relationships aspire to share finances, it’s not surprising that individuals view partner debt unfavourably. In saying that, not all types of debt are equal. Prospective partners are more likely to accept mortgages or business loans.”

These types of loans don’t evoke the same feeling as high-interest debts do. Mortgages or business loans are viewed as ‘good’ debt, as they relate to assets and the potential of increasing your earning capacity.

Indebted romantics

If you’re searching for love, and think that your debt might be holding you back, then your first step is to figure out how you are going to pay it down. Make a plan to cut out the variable spending, and commit to the plan.

Also, sit down and have a serious talk about money with your love interest. If your debt is hindering your relationship, it’s better to find out now, rather than later. You may learn that they, too, have some debt issues that they haven’t been able to discuss, or that they’re very supportive. While honesty is always the best policy, it’s never more important than when dealing with personal finances.

“While it can be difficult to talk about debt, it’s important to have open and honest conversations about the state of your finances to minimize relationship friction,” says Kidman. “You should also have frank discussions about the level of debt you’re willing take on in the future, and the circumstances under which it’s acceptable.”

One of the most common reasons that couples split up has to do with their relationship with money. To get your new relationship off to a good start, it’s best to be open and direct, and make a plan to become debt-free.

Rubina Ahmed-Haq is a journalist, personal finance expert and HPG’s finance editor. She appears on CBC TV and radio, CTV Your Morning, Global Toronto, and writes for ratesupermarket.ca. Follow her @alwayssavemoney. AlwaysSaveMoney.ca

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Debt Consolidation

Debt consolidation in Canada – how it works and why you may need it

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Debt consolidation in Canada – how it works and why you may need it

There’s no sugar-coating – the journey to financial freedom is tough. The good thing is, there are effective ways to get out of debt fast. If one of your current goals is to be debt-free, debt consolidation is worth considering. Keep in mind that the only way to keep your finances in order is to learn how to save money and make smarter financial decisions. With that said, we’ll share some more information on debt consolidation to help you decide if this is for you.

What is debt consolidation?

Put simply, debt consolidation in Canada involves bringing together small loans, bills or money you owe from different sources into a single, new loan and then make one monthly payment. Since you are consolidating different types of debts together into a combined loan, the term debt consolidation is used. Remember, each loan has its own repayment terms and interest rates so, in reality, you cannot combine them. What happens is that you take a new loan to clear all the smaller loans you had and then start paying the new loan only.

Who issues a debt consolidation loan?

Debt consolidation is offered by banks, credit unions and other financial companies that deal with credit. When you apply for the debt consolidation loan and your application is approved, the company will deposit the cash to your account and it’s your responsibility to clear the debt or they pay out the debts on your behalf.

What are the benefits of debt consolidation loan?

There are many reasons to consolidate different debts into one payment.

  • Simplifies the repayment process: You never have to keep track of multiple debts, there’s only one payment you need to make each month.
  • Saves money: Sometimes you end up paying lower interest rates especially if you had high interest credit card debt.
  • Can make life manageable: If you get a debt consolidation loan with a lower interest and amortization period then you can repay the loan in smaller monthly payments.
  • Can get out of debt faster: With a lower interest rate, it means most of the monthly payment you make will be going towards repaying the principal hence you’ll be able to clear the debt faster.

How do they determine interest rates on debt consolidation loans?

There are two main factors that determine how much interest you’re likely to pay for debt consolidation:

  • Your credit score: Banks and finance companies consider borrowers with a low credit score as more unlikely to repay debt as agreed in the agreement. Therefore, if your credit score is not good enough, lenders are not confident in your ability to repay the new loan as agreed. You are considered a higher risk borrower and hence they will offer you a much higher interest rate.
  • Collateral: Other finance companies will offer you a debt consolidation loan with lower interest if you provide good security. There are only specific things that the bank can accept as security, mostly stuff that they can easily convert into cash such as real estate or a new vehicle.

Is a debt consolidation loan for you?

There are certainly downsides to debt consolidation. One thing that most people do not understand is that you have to deal with poor financial habits before consolidating debt. Most people take debt consolidation loans with a lower monthly payment compared to their previous payments. This means that they now have something extra to spend every month. They then continue to spend more money than what they earn instead of creating a plan to stop overspending and get their finances back on track. This makes their financial situation worse and in the long run, their credit score becomes worse and qualifying for a new loan is almost impossible.

Therefore, the important thing to do when you take steps to get out of debt faster is to create a budget and follow it making sure you work with how much you spend versus what you earn.

What are your options for debt consolidation?

There are different ways to go about consolidating debt:

  • Home equity loan: This is often considered a second mortgage which you can qualify for if you have acquired equity in your home.
  • Line of credit: There are unsecured and secured lines of credit offered by banks for borrowers with a good credit score and a good income.

Don’t be fooled!

Debt consolidation should help you to get out of debt, not put you in further debt. Therefore, be keen on people who try to sell you a debt consolidation loan that has hefty up-front fees.


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Condo Finance

Finance – Common Money Dilemmas: How To Solve Them

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Finance – Common Money Dilemmas: How To Solve Them

Some money problems are easy to solve. Like, if you’re carrying a balance on your credit card, you should aim to get rid of it.

But sometimes the answer isn’t as clear and we’re faced with a money dilemma. Two choices that seem equal, but aren’t. In other words, a money dilemma is when there’s a few ways to spend your cash, but it isn’t clear which one makes the most financial sense. Here are some of the most common money dilemmas.

Renovate or move

Growing families often wonder if it makes sense to renovate and stay or move to another home. By staying put you save money on moving costs, property transfer taxes, realtor fees and general cost of packing up a home. Staying also means you keep the friends and family and the community groups around you. But remaining in your current home means a huge renovation budget. On the other hand, if moving to a new home, means upgrading your area, it might make more sense. A better area, means easier access to transit, better schools, more amenities like libraries and community centres, grocery stores and hospitals. Solve this money dilemma by figuring out which decision will enrich your life more.

What debt to pay first

If (for example) you’re in both student debt and credit line debt the money dilemma is what to pay first. Solve this by knowing which loan is costing you the most. If you’re student debt is more expensive, see if you can consolidate your loans into one lower interest payment. This will simplify your installments and get your loans paid down faster. Solve this money dilemma by seeing which loan costs less.

Borrowing money

Home values in Canada have risen dramatically and many are lucky to have considerable equity in their home. If you want to tap that, the main choices are a secured line of credit or refinance. If you want to borrow a set amount right away, than refinancing will work out cheaper for you. But if you want to borrow in the future, but you don’t know how much, a secured line of credit is the best option. In this case, don’t be concerned with the lowest interest rate. Solve this money dilemma by figuring out the loan that will cost you less in interest payments overall.

Used or new car

It’s no secret that a new car loses value quickly. According to Edmunds, a consumer website for car seekers and owners, in the first year you lose 19 per cent of the value. There are also added fees, like delivery charges and higher taxes. But if you’re keeping that car for its life, so around 10 years, you will know the history of that car. For example the maintenance record. These are things you sometimes have to guess when buying a used car. Solve this money dilemma by first figuring out how long you want to keep the car.

Big annual holiday or a few shorter trips

In this case, you need to weigh your family and work life. For some families, going away any other time than the summer is not possible. So you save up all your holidays and take off for a few weeks then. For others, smaller trips off-season are easier and often cheaper. You may work for a company that has some obvious downtime. Solve this money dilemma by looking at your family’s schedules and see which option will serve you better.

A money dilemma is different than a money choice. We make financial choices every day, some good and some bad. A dilemma is when what you want to do costs the same, but you can’t figure out which makes most sense.

RUBINA AHMED-HAQ is the Finance Editor for HPG. You can read her musings in Condo Life and Active Life. She’s also the Family Finance Advisor for PC Financial. She regularly contributes on TV and radio including CBC Radio, CBC News Network and Global News Toronto. Follow her @alwaysavemoney

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