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The Bank of Canada Interest Rates Stayed the Same for May 2018, But You Still Need to Be Prepared for a Hike

The Bank of Canada interest rates remained at 1.25% following a scheduled announcement on May 30, 2018.

The Bank of Canada (BOC) kept interest rates the same but warned that higher rates will be needed over time. Economists are predicting that higher rates could be coming into effect as soon as July 11, 2018.

Since last July, Canadian interest rates have gone up three times: first from 0.5% to 0.75% in July of 2017, then from 0.75% to 1% in September of 2017, and finally from 1% to 1.25% in January of 2018.

It’s been about six months since the last increase. If you haven’t taken a look at your debt situation, now is the time to get started — especially before rates increase again.

The BOC interest rate affects all forms of unsecured debt. This could be the interest owing on your credit cards, payments to an unsecured line of credit or personal loan, variable-rate mortgage, and much more.

Not only that, but if you have a fixed-rate debt that is up for renewal or refinancing (such as a fixed-rate mortgage) the renewal rate could be higher than it used to be because of the increasing interest rates.

What does that mean for you? You need to be prepared.

  1. Understand Your Current Financial Situation

Take a good look at your finances and current debts. What ones are unsecured (a.k.a. affected by interest rates)? What ones are coming up for renewal? How much do you owe total? These questions can seem overwhelming to answer if you’re carrying a lot of debt, but you need to know — especially before it becomes unaffordable.

The 1.25% interest rate is still relatively low, but if you’re in debt even a slight increase can mean much bigger payments. You don’t want to find yourself in a situation where you can’t make ends meet any longer.

  1. Be Extremely Cautious of Any New Debts

There are certain situations where you might want to take on new debt, despite increasing interest rates. Perhaps you are buying a house and need a mortgage. Or maybe your family needs to invest in a new or new-to-you car. A third, common reason for wanting to add new debt is if you’re aiming for credit repair. In this situation, it can be beneficial to add new, secure debt that you pay back on time each month to boost your credit score.

The key words here are secure debt.

If you have a good reason for needing to accumulate debt, be thoughtful about where that debt comes from. Opening a new, unsecured credit card probably isn’t the wisest choice. And quick-money options that sound too good to be true, like payday loans, also won’t do you any favours. You want to choose a secured loan that is going to give you one fixed (a.k.a. unchanging) monthly payment. This will allow you to plan a budget and make your payments on time (critical so you don’t hurt your credit score). Make sure you are using a lender who reports to a credit bureau and don’t be afraid to ask questions about what would happen with your debt if interest rates increase again.

  1. If You’re Carrying a Lot of High-Interest Debt, Consider Debt Consolidation Options

If you have $5,000 of debt on one credit card, $2,000 on another, a $50,000 unsecured line of credit, and an unsecured loan for $10,000, you’re going to be owing a lot of interest. And that amount will only increase if interest rates rise again.

Even if you can afford the increase, why pay more interest than you have to?

This is one of those times where seeking out another form of financing might be helpful to you — specifically one that can consolidate that debt and leave you with one monthly payment, preferably at a fixed interest rate. This way you can plan your payments out, not worry about increasing interest rates, and actually save money in the long run.

In any of these situations, it’s vital that you choose a financial service you can trust. You want to make sure you’re protected if interest rates increase. You also want to choose a lender that reports to the credit bureau and offers a clear, realistic payment plan.

At Prudent Financial, we do all of that and more. We offer secured personal loans to people with good credit, bad credit, and everywhere in between.

Don’t wait until the next BOC interest rate increase to get your finances in order. Contact us today.

Visit https://www.prudentfinancial.net or call 1-888-852-7647.

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