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Consolidate debt pay less interest

Want to pay off debt? Pay less interest!

Consolidate debt pay less interest

It’s not a new concept but it is one that is worth remembering and so I will repeat it. If you want to pay off debt, start by paying less interest.

January is usually a tough financial month for most of us.  Holiday bill payments, rrsp contributions, property tax bills and if you are self-employed, you probably have to make some sort of business tax or corporate tax payment.  If December is the Holiday Season, then January feels like a hangover!

Banks and Credit Card companies love this time of year because this is when we will normally carry a balance and have to pay those crazy interest rates that range from 9% to 25%.  Wait, before you get too depressed, there could be a better option.  There’s a less expensive way to manage your debt. Continue reading “Want to pay off debt? Pay less interest!”

Lower rate = Lower payment and a Lower balance in 5 years!

Mortgage Burning1 We all know that a lower interest means a lower monthly payment.   But did you know that a lower interest rate means you will also owe less when your mortgage comes up for renewal?    This has been overlooked by consumers and experts alike.  I haven’t seen any articles covering this.  And it should change how you choose your next mortgage product.

It all has to do with the effects of compounding interest.   Let’s take a look at 2 borrowers, each with a $400k mortgage.  Borrower 1 is Mary.   Borrower 2 is Dave.   Mary has today’s 5 yr fixed rate of 3.29%.   Dave has the more normal rate of 5.50% (the rate most experts think we will see in the next 3 to 5 yrs).    We’ll amortize both mortgage over a 25 yr term.

Dave’s mortgage has monthly payments of $2441 and a balance owing of $356,749 at the end of 5 years.   Mary’s mortgage has monthly payments of $1953 and a balance owing of $343,728 at the end of the first 5 years.  Notice the difference in the balance owing after 5 years.    We are talking about a $13,021 difference.  That’s the effects of compounding interest. Continue reading “Lower rate = Lower payment and a Lower balance in 5 years!”

Debt consolidation tip… just pay less interest!

Good debt Bad debtJanuary is usually a tough financial month for most of us.  Holiday bill payments, rrsp contributions, property tax bills and if you are self-employed, you probably have to make some sort of business tax or corporate tax payment.  If December is the Holiday Season, then January feels like a hangover!

BANKS and Credit Card companies love this time of year because this is when we will normally carry a balance and have to pay those crazy interest rates that range from 9% to 24%.  Wait, before you get too depressed, there could be a better option.  There’s a less expensive way to manage your debt. Continue reading “Debt consolidation tip… just pay less interest!”

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