Canadian Money Forum banner
1 - 3 of 20 Posts

· Registered
Joined
·
72 Posts
Aside from the 8500 coming your way, do you have any cash at all?

If not, I'd say do as Four Pillars suggested. Get a budget going so that you have a plan in place to attack the debt.

By my count you have about 32K in debt.

With the 8500, you could set aside 1k for emergencies, enough to pay the gains taxes, and use the rest to pay off your line of credit. This would free up cash to place on the car loan, or visa debt.

In the end, if you consolidate, I don't think you would really pay off the debt that much faster. What would make the most difference is figuring out a budget and sticking too it until its all gone. I think you would be surprised by how quickly you could pay all this off with your income. If you got really serious about it, it could take less than a year.
 

· Registered
Joined
·
72 Posts
Sounds like your aren't in debt because of overspending, but because of unfortunate circumstances. I've seen many friends consolidate loans only to continue to keep paying the minimum payment. But you don't seem to have the baggage of bad habits.

In their mind their consolidated debt is just like another utility - a fact of life. But you don't have that problem, which is great!

Consolidation will help reduce your interest rate; so, on a purely rational basis, it makes sense to do.

As for the rrsp contribution. You could consult this page:

http://www.taxtips.ca/calculator/cdncalculator.htm

If you enter your income in the calculator, and in "RRSP Deduction", you will find that you save about 2600 dollars in taxes. So, at the end of the day, you would have 6 more K in the RRSP (assuming you keep 2k for emergencies and bit extra for the gains tax?) and 2600 in tax refunds. If you used the refund to pay down the debt. I guess it would be a good idea.

Personally, I would take the entire 6k and throw it on the line of credit. This would help me focus all my intensity on the visa debt. But, as long as you place your intensity on the debt, I don't think either method will matter. Its just a matter of preference?
 

· Registered
Joined
·
72 Posts
Vej, another perspective is to look at things from the "Net Assets" angle. If you put 6k in the RRSP and put the refund towards your debt you will have increased your position, i.e. net assets, by 2600 over the alternative.

That is, you will now have an extra 6k in retirement savings, and have decreased your liabilities by 2600. In this point of view, what you have suggested makes a lot of sense because you have increased your net assets by 8600.

If you did as I suggested, and just used the 6k to wipe out the line of credit, you have really only improved your net assets by 6k.

I hope this makes sense. Of course, your RRSP is a tax liability, but only when you decide to withdraw funds, hopefully when your tax rate is lower.

Update Finally, you will get several recommendations for debt reduction. A good explanation of the three most common strategies (including consolidation) is explained here by Kathryn at million dollar journey: http://www.milliondollarjourney.com/paying-off-debt-lowest-balance-or-highest-interest-first.htm

I am advocating Strategy No. 2, Samspon is advocating Strategy No. 1 and you are looking at strategy no. 3. At the end of the day it is a personal decision that only you can make. I hope this helps!!!
 
1 - 3 of 20 Posts
This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.
Top