How to reduce debt as interest rates are set to remain high for the foreseeable future

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How to reduce debt as interest rates are set to remain high for the foreseeable future
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Although debt reduction has been a topic of conversation with clients for years, many are now focused on paying down debt more rapidly

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Discussions have ranged from paying down an outstanding vehicle loan of about 10 per cent interest to conversations about mortgages, lines of credit and HELOCs. When it comes to strategy, ramping up debt repayment doesn’t necessarily derail long-term financial plans, he says. Assets may only need to be drawn out of either savings or investments for debt with a very high rate of interest. Usually, all goals can be addressed in unison if clients have a good understanding of their cash flow.

Making the situation even more challenging is that traditional ways of reducing expenses, such as downsizing or purchasing a used car instead of a new vehicle, are not likely to result in savings in this market, she says. “ limiting their cash flow; or, if they had an emergency fund or investments, they’re having to think about paying down their mortgage now,” Mr. Prasad says.

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