Most Canadians have some form of debt. Not all debt is bad – for example, taking out a student loan can be an investment in your future. But borrowing is something to do wisely – using credit to spend beyond your means can put your budget out of balance. If you need to borrow money, here are some things to keep in mind.
Shop around for the lowest interest rates
When applying for a credit card, try the Financial Consumer Agency of Canada’s online credit card comparison tool. It examines the interest rates, features and reward programs of many credit cards. The tool offers unbiased, trustworthy information.
If you regularly carry a balance, a low-interest rate card could be the way to go. But if you use your credit card for most of your purchases and pay it right back as you go, getting one with a rewards program could be beneficial to you.
Shopping around is also key when getting a mortgage. Take some time to compare different options such as variable and fixed interest rates, and open and closed mortgages.
Think twice about “buy now, pay later” offers
Some retailers, such as furniture stores, may offer you credit at 0 per cent interest for a certain term. Be sure to read the fine print and remember to pay your balance in full by the time it is due. If you don’t pay off the balance by this time, the fees and high interest rates will add to your debt load.
Ask yourself these questions
Consider the following before you take out a loan or a line of credit:
- Do you need the money now or could the expense wait until you’ve saved for it?
- Do the monthly payments fit into your budget?
- Will you still be able to afford the payments if interest rates change?
- What happens if you miss a payment?
You can find more practical tips and tools to help you borrow wisely at canada.ca/financial-literacy-month.
