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Debt Consolidation Tip: Pay less interest!

Collateral ChargeThe beginning of the year is typically tough financially for most of us. Holiday bill payments, RRSP contributions, property tax bills, etc. And, if you’re self-employed, you probably have to make some sort of business tax or corporate tax payment. If December is the Holiday Season, then January and February feel like a hangover!

Banks and credit card companies love this time of year because this is when we’re most likely to carry a balance, forcing us to pay those crazy interest rates that range from 9% to 24%.

But, wait! Before you get too depressed, there may be a better option. There’s a less expensive way to manage your debt.


Canadians seem to think debt consolidation is a dirty word. Studies show that we’re paying down our mortgage balances faster (I like that trend), except we’re carrying other higher-interest debt such as car loans, unsecured lines of credit and credit card balances.

The big problem here is that these non-mortgage debts carry extremely high interest rates ranging from 6% to 24%. (Sorry Banksters, I’m leaking your secret!) So, when did it become okay to carry a smaller mortgage but still carry all that other debt? Don’t forget that mortgage rates today range from 2.9% to 3.85%. Which rate would you rather pay?


Professor Moshe Milevsky from Toronto’s Schulich School of Business published a study about debt diversification. The results show some clear differences between Canadians and Americans. We have better hockey players, better ski mountains and better beer… sorry, that’s not it LOL. His results showed that we don’t like to touch our mortgages… we’d rather use other credit facilities with higher rates. And this type of thinking has to change.

“Don’t put your eggs in one basket”.  Well, that may work for your assets, but it doesn’t work for your liabilities. I’m not sure why so many of us think this way. Maybe it’s because our parents told us to pay off our mortgage first. Good advice, but they didn’t say to borrow other money at higher interest rates at the same time. Or maybe it’s because we’re being hammered by the media with reports about ‘record personal debt levels’ and somehow we believe that if we don’t touch our mortgage, we aren’t part of that group.


Stop and think about your current situation. Do you have some equity in your home? Do you owe more than $20,000 in other debts? If so, then you could start saving money immediately. With house prices at all-time highs and mortgage rates still on the low side, it’s a great time to review your options. Speak with an experienced mortgage broker today.

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114;

Steve Garganis View All

As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.

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