National Post

SHADES OF RED

- Danielle Kubes, Financial Post

The best debt is none at all. But if you must borrow, Laurie Campbell, CEO of Credit Canada, a non-profit organizati­on that provides financial counsellin­g, has laid out the best to the worst on a sliding scale. An A is reserved to those in the black, and then it goes down ( and gets more expensive) from there. It’s doubtful too many readers will find themselves below a C since the majority of Canadians’ household debt stems from mortgages.

I-n fact, over 70 per cent of our collective $1.874-tril lion debt load is due to mortgages, with 20 per cent due to lines of credit (which many have taken out against a house to get larger cash flow) and only five per cent from credit card debt. But remember: It’s not OK to have any sort of debt unless you can afford the monthly payments and are dedicated to getting rid of it.

Mortgage or student loan debt: B+

“The interest rate on mortgages are quite good right now, so that’s the good news, but if you keep dipping into that equity on your home you’re not really getting anywhere,” Campbell said.

"Student“loans can be good,” she says, “ut you h-ave to work your butt off to pay them off as quick ly as you’re done school or else you’re delaying your ability to move on with your future because you’re s-till in a situation where you’ve got a huge fixed pay ment.”

Consolidat­ed debt and lines of credit: B

“It’s a great idea to consolidat­e debt into a lower rate as long as you don’t rack up those credit cards again,” Campbell says. But, since consolidat­ed debt often takes the form of a line of credit, it can be hard to get out of it. “It’s not a fixed payment. You get a $100,000 line of credit, you rack it up to $5,000, you pay it off, but then guess what? You’ve got room to rack it up to $ 5,000 again and you never get out of debt because there’s no sunset clause, so people perpetuall­y find themselves in hot water with their line of credit.”

Credit Cards: C

“An extremely expensive form of purchasing items if you’re not going to pay it on time,” she says.

Overdraft Debt: C-

“You’re charged immediatel­y and the interest is around 21 per cent,” Ca-mpbell says. “It’s a very expen sive form of debt”

Finance debt, like the “Don’t Pay a Cent Event”: D

“Suddenly that couch you bought for $1,000 has a retroactiv­e interest for 30 per cent.”

Payday loans: F

“It tends to be a never-ending loan,” Campbell says.

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