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A few years of a combination of under-employment and trying to keep afloat a floundering business has left me (us) with 50k debt on a line of credit and a credit card. We are getting 5k back from income tax but that still leaves us with 45k of debt.

At last I am now back working full-time with a decent salary, but we are left saddled with this debt. Do we pay off the debt with our RRSPs (I am aware of the tax implications of this) and start from scratch, do we refinance our mortgage and roll it into that – where it takes us longer to pay it off but at a lower interest level but leaves us enough each month to actually start saving?

Obviously we are capping our credit products and eliminating the possibility for this to happen again. Just really want to know our best option for a fresh start.

Chris W. Rea
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Financial Idiot
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1 Answers1

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I would personally look at consolidating your debt at a lower interest rate by refinancing your mortgage. I would leave any retirement funds alone unless it was absolutely necessary to touch it with no other avenues available.

However, once you have consolidated your debt into the mortgage I would pay more than the minimum amount so that you don't take too long to pay it off. I would put about 50% of the freed-up cash flow back into the repayments, that way you will be paying more debt off quicker and you will have additional cash flow to help your monthly budget.

Another good point would be to go through your monthly budget to see if there is any expenses you could reduce or eliminate.

Victor
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