Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Debt (Photos.com)
Debt (Photos.com)

Managing Debt

When to consider borrowing Add to ...

Borrowing can be a good financial strategy if it helps you acquire something – like a house or an education – that could add to your net worth. It can also help you acquire things like a car that you can’t easily save up for in a timely way. As with any debt, consider the interest costs and only borrow what you can afford.

More Related to this Story

When it may make sense to borrow

1.  Buy a home

If you choose to buy a home, you’ll likely need to get a mortgage. Although buying a home isn’t for everyone, it can be a good investment if the value of your home increases over time.

2.  Buy a car

If you need to buy a car, you might have to take out a loan or lease to pay for it. Always weigh the cost of borrowing against using your own savings.

3.  Pay for education

Student loans are one of the cheapest forms of debt. They can be a good investment if getting a degree means you’ll make more money when you enter the workforce.

4.  Save for retirement

You may want to borrow money to put into an RRSP. RRSP contributions lower your taxes, and you’ll be saving for your future. To reduce the amount of interest you’ll pay on this loan, pay it within a year.

5.  Start a business

The type of loan you need depends on how much you want to borrow, how you plan to use the money, how long you’ll need it, and how you’ll pay it back. Your borrowing options may include banks, trust companies, credit unions, government agencies, or family and friends. Make sure you have a solid business plan and a strategy for paying back your business loans.

6.  Pay off debt at a lower interest rate

If you have a lot of high-interest debt, look into paying off that debt with a lower-rate consolidation loan. Two common options are a home-equity loan or line of credit. The interest rate may be low, but keep in mind that you could lose your house if you don’t make the payments.

Use this calculator to see how long it will take you to pay down debt at different interest rates.

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca

 

Follow us on Twitter: @GlobeInvestor

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories