Posted On Dec 28, 2024

Carly and Jason, a young couple who made a life-changing decision early in their marriage to eliminate consumer debt and use their home as a financial tool. Now debt-free and thriving, they enjoy newfound financial freedom and exciting opportunities

 Meet Carly and Jason whose dreams were  similar to any other young couple. Ten years ago they tied the knot while Jason was an apprentice  electrician and Carly was in her final year of nursing school. Together, they purchased a modest home and began their  new lives. However, as it happens with many families, they soon wanted more than they could afford.  It began rather harmlessly: there was a Gold Points Visa for sports equipment, clothing, and groceries, a Canadian Tire  card for the projects around the house, and even a furniture store card for the beautiful new living room  set. It didn’t take long for them to realize that they were racking up the balances on their consumer credit cards  and were in over their heads.

 The High-Interest Trap

 Every month they faithfully  paid  the minimum amount, but the balances were hardly moving. Their Gold Points Visa had balance of  $6,200 at a very high interest rate of 20.99%. The Canadian Tire card had a balance  of $2,100 also at this rate as well as the furniture card which had a shockingly high  interest of 21.90% on $4,700. Jason often joked that the interest was  consuming more of their paycheck than they were and the truth of it wasn’t far off either – they  were wasting an outrageous amount of money each month on interest and the debt was hardly decreasing at all.

 Rewards Points: The Mirage

“At least, we are building up points,” Carly  would laughingly say, in an attempt to be optimistic. They had a few AirMiles and some Canadian  Tire dollars, but the rewards were like a small drop in the ocean compared to the interest they were  paying. The funny thing is that they were basically buying their own rewards with high-interest rates.

 The Turning Point

  Everything changed when their friend Rik, a mortgage broker with a name very similar to mine, came over for  dinner one evening. It was quite understandable that Carly and Jason tried to put a positive spin on  things, until the conversation switched to  finances. Rik listened carefully and then suggested something which the couple had never  even contemplated: He advised them to take up a Home Equity Line of Credit (HELOC) to  wipe off their high-interest debt. “It’s just crazy enough that it might work,” Jason joked after  Rik explained to them that it was a good approach.

 Why a HELOC Made Sense

 A HELOC provided a much lower interest rate of  6.2% (Prime + 1%) versus the 21% they were paying.  Carly and Jason also understood that they could repay all the consumer debt they had  with one single payment. They came up with a plan with Rik and found out that if they could  switch from their credit cards with high interest rates to the HELOC they would be able to  save around $11,000 in interest payments. It was a rather simple choice to make.

 From Debt to Freedom

 After the HELOC was set up, Carly and Jason made a deal with each other  to repay it as  fast as they could. They increased their payments by $180 in addition to the  $320 monthly minimum payment that they had already been making on their cards. With this strategy, and within a few years, they paid off their HELOC, feeling as if it was as if a great burden had been lifted off their shoulders. But they  didn’t stop there. Carly and Jason got inspired with their success and decided to turn their focus to their mortgage and repaid it within the next 12 years.

 Today, Carly and Jason are at different stage in their financial journey. They have even thought about buying a house as a rental property, which would provide them with the means to travel as much as they want. With their finances in good shape, they have been able to pursue other desires that they could not have imagined such as taking long vacations and looking at commercial real estate investments which will help them as they get older, decide to have a family, or continue finding new adventures and opportunities.

 Conclusion

 Carly and Jason’s story is a common one, and that  consumer credit cards, although convenient and offering numerous rewards, can be quite costly and potentially dangerous. Thus, they transferred all their debts into a HELOC and strictly followed a plan to repay it, and now they are free to enjoy life and all it has to offer. Your life doesn’t  have to be a unending cycle of consumer debt. It is possible to take control of one’s financial situation  and create the life that one wants with the right approach and determination.

Feel free to give me a call at 587-404-6393, or reach out to me at rik@tmcweconnect.ca.  I’d love to be your trusted mortgage professional.  www.rikkaminsky.ca TMCWeConnect Check out my other useful blog posts here!

 

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