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Daily Banking

Let's dive into details on loans and debt

October 27, 2022
min read

Learn how consolidating your debt can help you reach your financial goals.

If you have debt, it can sometimes feel like you're drowning in payments and bills with no end. If your goal is financial freedom and security, growing debt can feel like a ball and chain on your leg, holding you back from experiences like travel and important milestones like buying a home or a car. The good news is that there are tools and tips to help you take control of your financial life, leaving you with more cash flow to make your future dreams come true. Whether it's home ownership, a vacation or retirement, we'll discuss how a personal loan can help you simplify debt repayment and even help save you money.

Debt Consolidation

Cambrian loans are designed for many purposes to help you with bigger purchases or expenses. Whether you're looking for a new car, planning a renovation, or want to simplify your life by consolidating your existing debt.

Benefits of Consolidating Debt

  • Make a payment towards all your debt in one single loan, helping your personal cashflow
  • Save money with lower interest rates
  • Stress less with lower monthly payments
  • You can pay off debt faster, when locking in a lower rate you save on interest, and a higher portion of  your payment is applied to the principle of the loan
  • Get approved in as quickly as 15 minutes

If you have more than one debt to pay, like credit cards or car loans, consolidating your debt into a single loan can streamline your payments. In addition, this act can help you save on interest, as the interest rate on a personal loan is usually much lower than the interest rate on a credit card.

When you have a personal loan, you can set your payment amount and terms with your financial institution. They will let you know how many payments you need to make until you repay the loan. Mark that date in your calendar. It will be something to look forward to! Many people find knowing their "free-from-debt" date empowers them to continue to work towards their goal of becoming debt-free.

If you like the list of benefits, then consolidating your debt might be the right choice. Even if you have a mix of good and bad debt, a Cambrian Advisor can help you navigate your way to financial freedom with a PayOff Loan. Ever heard of "good debt"? We'll explain what people mean when discussing good and bad debt.

What's Good Debt vs. Bad Debt?

When discussing debt, you may hear people describe "good debt" and “bad debt”. But what is "good debt", and what does it look like? And when can "good debt" actually be "bad debt"?

Good Debt = Mortgage

"Good debt" is debt that will allow you to purchase something that will increase in value overtime.. That means the item purchased is worth more later than it was at the beginning. Examples of these "good debts" would be purchasing a house with a home loan (called a mortgage). Mortgage interest rates are generally lower than interest rates on other types of loans, and the value of your home may increase over time. That means the debt you take on by purchasing a home is offset by the value it earns while you're living there. For example, the housing prices in Canada raised approximately 20% from 2021 to 2022. That's a huge increase in value!

Good Debt = Education

Investing in your education increases your earning potential. The education you earn helps increase your wages and increased your eligibility for promotions and higher salary positions. Education does pay. Canadians earn more when they have  post-secondary education or training.

So what does "bad debt" look like? Bad debt is consumer debt, particularly credit card balances. Credit cards charge a high-interest rate, so it's important to remember not to make a purchase on your credit card if you don't have the money to pay for it. Are you currently dealing with credit card debt? A consolidation loan is a great way to get debt-free at a lower interest rate.

Bad Debt = Consumer Debt

Most of the time, we use our credit cards to fund a night out, a new outfit or other consumer needs. The problem with using your credit card comes when you start using it to pay for things you can't afford. Consumer purchases usually don't increase in value in the long run. For example, the pair of shoes you purchased at the mall probably won't be worth more money after you've worn them, whereas a house is usually worth more money even after you've lived in it for several years.

Can Good Debt = Bad Debt?

When does "good debt" become bad? While a mortgage is an example of good debt, taking out a mortgage within your means is important. Buying a home you can't afford will add to your stress and make this milestone feel like a burden rather than a reward. Our advice, take your time and save your down payment.

So if there's such a thing as good debt, does it make sense to borrow money to invest in something that will increase in value? Let's get into it. If you want to learn more about loans and borrowing, or have questions about the PayOff loan, book an appointment with a Cambrian Advisor today.

Today’s Rates

*All rates and yields subject to change without notice.
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“I had a wonderful experience at Cambrian. I've been with the same institution for the last 21 years and all the fees and restrictions have finally pushed me into wanting to make some changes.

My advisor was prepared for my arrival with all the documents ready and waiting. He took the time to go over each one...”

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