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Good debt, bad debt and everything in between: how to borrow smartly
- From home equity lines of credit to pre-authorized bill payments on your credit card, TD Canada Trust research prompts Borrowing 101 refresher for Canadians -
- TD INFOGRAPHIC ON HOW TO BORROW RESPONSIBLY AVAILABLE AT: http://www.smrmediaroom.ca/TDBorrowing101 -
TORONTO, April 16, 2013 /CNW/ - Access to credit is an ongoing need for Canadians as they navigate through expenses that range from the unexpected to buying a house. In fact, a recent TD Canada Trust survey found the top three credit options used by most Canadians within the past five years are bank-issued credit cards (92%), department store cards (48%) and mortgages (42%).
TD Canada Trust's Farhaneh Haque, Director of Mortgage Advice and Stephen Menon, Associate Vice President of Credit Cards have teamed up to outline the popular credit products available and provide Canadians with tips on how to borrow responsibly.
"Believe it or not, some debts can actually work for you," said Haque. "Borrowing money to invest in something that will increase in value, like a home, could be considered good debt. In contrast, carrying a balance on your credit card to fund short-term lifestyle spending is not sustainable and should be paid off immediately."
"Used responsibly, financial products like credit cards and lines of credit can help you finance major expenses cost effectively and manage your cash flow," said Menon. "However, these benefits may be outweighed if you're taking on too much debt. Credit products should not be used for perpetual borrowing, with no plan in place to repay the debt."
According to the survey, credit cards are the most widely used personal credit product. More Canadians applied for a credit card in the past year (29%) than any other personal credit product. Two-thirds of Canadians (66%) agree that setting up pre-authorized bill payments on a travel rewards credit card is a good way to maximize the travel rewards earned and manage your finances.
"When used correctly, credit cards can help manage and track your spending and build your credit history," said Menon. "A credit card can also maximize your spending power if you choose a card that comes with travel or cash back rewards. But no matter which credit card you have, ensure you pay your credit card bills in full and on time each month to avoid interest charges on your purchases."
Home Equity Line of Credit
Seven in ten Canadians (70%) say they have never used a home equity line of credit, even though 82% correctly believe that a home equity line of credit can be a lower-cost option than a personal loan for financing a home renovation.
"Many homeowners have the option to use the equity they've already built in their homes to finance upgrades which may improve their home's resale value," said Haque. "A Home Equity Line of Credit could allow you to use up to 65% of the lesser of the appraised value or purchase price of your home, with a lower interest rate than most alternative forms of unsecured credit."
The majority of Canadians think a mortgage is 'good' debt (88%) and understand that weekly mortgage payments, versus monthly, will help reduce the mortgage amortization period (84%).
"Many borrowers want to pay down their mortgage ahead of schedule and be debt-free sooner, but they worry about not having the cash available if they need it in the future," said Haque. "If you have paid down your mortgage ahead of schedule, and if you qualify, you may be able to use that prepaid amount to take a temporary 'vacation' from your scheduled payments at a later date. A payment vacation can be particularly useful if you're starting a new family or find yourself temporarily unemployed."
For more information on flexible mortgage features and to see how a payment vacation could work for you, please visit http://www.tdcanadatrust.com/home. Canadians can also ask questions related to broad range of financial advice, including borrowing and managing credit at the TD Helps community: http://www.td.com/to-our-customers/tdhelps
About the TD Canada Trust Borrowing 101 Poll
TD Bank Group commissioned Environics Research Group to conduct an online custom survey of 6,014 Canadians aged 18 and older. Responses were collected between January 10th and 25th, 2013.
About TD Canada Trust
TD Canada Trust offers personal and business banking to more than 11.5 million customers. We provide a wide range of products and services from chequing and savings accounts, to credit cards, mortgages and business banking, to credit protection and travel medical insurance, as well as advice on managing everyday finances. TD Canada Trust makes banking comfortable with award-winning service and convenience through 24/7 mobile, internet, telephone and ATM banking, as well as in over 1,100 branches, with convenient hours to serve customers better. For more information, please visit: www.tdcanadatrust.com. TD Canada Trust is the Canadian retail bank of TD Bank Group, the sixth largest bank in North America.
SOURCE: TD Canada Trust
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