Good Debt vs Bad Debt or Why You Need a RRSP Loan

Smart Rates

Loan Approved For most Canadians, saving money can be an issue, let alone eliminating bad debts. But for many, borrowing money for the right reasons can lead to increased personal savings. We like to categorize loans into three types… Bad Debt, Not So Bad Debt and Good Debt .

Bad Debt: 

Bad debts are the loans at high rates (anything over 7%) and are usually easy to get and hard to pay off. Credit cards, overdraft accounts (not line of credit accounts which are different), store credit with no payments for a year, payroll loans, etc. Next time you see one of those payroll advance adds on TV, pause the screen when the fine print comes on and read it. To make it easy for you, a $20 fee for a $200 loan for one week works out to approximately 520% per year as an interest rate. Definitely very bad debt.

Not…

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