The Bank of Canada’s move to lower its benchmark interest rate by a half point which led to a reduction in the prime rate charged by major banks provides Canadians with two choices: borrow more or pay down debt.
This opportunity has always been there but the move by the central bank is a good reminder.
The cost of borrowing is lower today than it was yesterday. And we have to decide if we want to borrow more because it is cheaper or pay off our debt because now less will be going to interest on the debt and more of our payments will be applied to the principal.
Now this is only going to work with secured loans like a line of credit on a house. Credit Card rates are not tied to the prime rate so they won’t be changing but for those of us who have tapped the equity in our properties, this is a rare opportunity…..just as the cost of borrowing is now lower the cost of paying off a loan just went on sale as well.