What to do with your debt with interest rates rising?

What to do with your debt amid rising interest rates?

It’s no secret that interest rates have been on the rise. While this might be good for investing in things like guaranteed investment certificates, bonds and even savings, it isn’t so good for your debt.

As interest rates rise, so do your debt payments that aren’t locked in at specific rates. Lines of credit and variable mortgages are a few examples. As the rate increases, so does the interest you are responsible for paying on these loans. It is important to note that typically interest rates on unsecured debt are going to be higher than secured debt simply because they aren’t backed by physical assets.

Tips for dealing with debt in a rising interest rate environment:

• Pay down your highest interest rate debt first such as credit cards, then unsecured lines of credit
• Review your mortgage. If you are in a variable mortgage, you may want to consider locking in a fixed rate so your payments are known for the length of your term and won’t keep fluctuating or increasing
• Review your discretionary spending habits. Are you paying for subscriptions you don’t use?
• Take a look at your monthly income, consider how much is going where and allocate more to debt if possible
• How much are you saving a month? Try to increase that if possible to have more of an emergency fund should you need it
• Debt consolidation – Is it possible to consolidate some of your higher paying debt to lower interest rates?
• Can you add a part-time job to help you manage your debt payments?

There is no question that money can be stressful, and of course, having debt can add to your stress level. Interest rates were at historic lows the past few years, so it shouldn’t be much of a surprise that they were going to have to increase at some point. No one knows what the future holds with interest rates, how quickly they will continue to rise or when they will go back down. The best you can do is try to manage your debt by making smart choices and to keep your payments at a manageable and comfortable level.

Todd Yuzdepski, Wealth Advisor, CFP®, CIM®, FCSI®, BA Celeste Yuzdepski, Wealth Advisor, B. Comm, CFP®, CIM®, CFDS, FCSI®

Information in this article is from sources believed to be reliable, however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. The views are those of the author, Todd Yuzdepski, and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. Raymond James Ltd. is a Member - Canadian Investor Protection Fund.