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How to help clients overcome a mountain of holiday debt


Between gift-giving, decorating, and preparing for celebrations, overspending during the holiday season is hard to avoid. With additional stresses brought on by the COVID-19 pandemic, including job losses, reduced income, and compounding financial pressures, Canadians should be more vigilant than ever before when it comes to monitoring their spending and their credit. Mortgage brokers can preemptively reach out to clients with some simple tips on how to avoid the holiday hangover and how to consolidate debt so that it doesn’t become a major long-term burden. 


Set a budget – Taking an overarching look at your overall finances this year, setting aside what’s needed for everyday costs to ensure you can still meet your financial commitments. Make a list of upcoming holiday events as well as a list of all expected expenses, like gifts. Don’t forget to add extras to the list, like gift wrapping, cards, food, and decorations. This list will help you divvy up your extra funds without having to overextend. The hardest part is sticking to it. 


Get creative – Mix it up this holiday season by suggesting drawing names for a gift exchange rather than buying gifts for an entire group of friends. Homemade cards or recycling paper bags as gift wrap are also great ideas for saving on the extras.


Plan early for next year – The earlier you start your holiday planning, the more time you have to research purchases, take advantage of sales throughout the year, and avoid the holiday rush.  


When the post-holiday bills start coming in, how can you help clients?

Last year, more than one-third of Canadian shoppers went over budget on holiday spending by an average of $459. This year’s holiday debt will also add to what’s been accumulating over an already challenging year, and the balance of debt may come as a surprise to many. Mortgage brokers can help clients by taking some time to discuss current financial status and debt mitigation solutions. 

One solution is debt consolidation. Considering the average Canadian credit card charges approximately 20% interest on debt, consolidating that debt into a lower interest private mortgage can not only save money but also simplify payments and help get rid of debt faster. Mortgage brokers should encourage clients to compare credit card interest rates and fees to those of a private mortgage. It may help them to understand the benefits of debt consolidation with a simple comparison.

For example, if a client has multiple credit cards with varying interest rates, it may look something like this: 


Current Monthly Payments
Creditor  Balance Rate Interest-Only Payment
CC 1 $15000 19.99% $2998.50
CC 2 $11000 24.99% $2748.90
CC 3 $ 8500 19.99% $1699.15
CC 4 $7500 19.99% $1499.25
CC 5 $15000 21.99% $3298.50
$57,000 Total Interest $12,244.30
Annual Percentage Rate  21.48%


In this scenario, the individual will likely find it difficult to get out of debt, because often, they are just able to make interest payments. Compared to a second mortgage to consolidate this debt with a $62,000 loan, up to 75% LTV:


Consolidation Loan $62,000 7.99% $4953.80
Lender Fee 3.00% $1860.00
Total Interest $6813.80
Annual Percentage Rate 10.99%


A private mortgage would save this client $607.54 per month (before the lender fee). CMI also offers amortized payments, which could lower the principal balance over the term of the mortgage. Debt consolidation organizes payments into one single monthly payment and can help clients kick-off 2021 on a brighter note by getting out from under holiday debt. 


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