Financial Channel

Well I just graduated in University and got a new full-time job a few weeks ago and I'm wondering how to go about "attacking" my debts, increasing my credit rating, and perhaps planning my RRSP/investments. I also have a few questions relating to credit cards, so maybe someone can answer those as well.

Basically my debt consists of:

government Student Loan of $1000 (interest rate ?%)
TD Student Line of Credit - Approximately $6000 of which I have 1 year of just interest payments. (prime + something)
Credit Cards (3 now) - 1 TD Visa, 1 CIBC Visa, and 1 Citi MC which I just got so I could transfer the balances of the former 2 to pay the low 0% or 1% rate whatever it is. Essentially the TD/CIBC have 0 balances, and the Citi has a $4300 balance at the low transfer rate.

In terms of assets, I have $2000 worth in stocks and a good steady flow of cash due to low expenses (minimal rent, food, etc.) and a decent job.

My question(s) then is, what would be a good approach in terms of which debts to tackle first and by how much? I have enough to pay off the government student loan straight up, or I could just have it paid off in monthly payments of $25. I dont have enough to immediately get rid of the other two though.

For investments, I'm interested in putting some money that would go into an RRSP but also earn a modest interest rate... (ETFs?).

For my TD and CIBC cards, I'm interested in converting one of them to a low rate card for big purchases, and the other to one for "monthly" expenses that would yield some kind of Dividend (1%). I know CIBC and I think TD allows you to change your card depending on the type you want, but what I don't understand is whether or not it effects your credit rating in terms of the credit card length. For example, I have a TD Visa for 5 years, if I switch it to another TD Visa does it count as if I'm closing one and starting new, or does the additional time just get added on assuming I stay with the same bank.

Sorry for the long post, hopefully someone can give some advice.

Well, I think the government loan probably has a low interest rate, so just pay the minimums until the LOC is paid off. (basically, pay the highest interest debt first)
As for converting to low-rate cards, TD and CIBC both charge a $25 (maybe $29 for CIBC) annual fee. Go with capital one or something, but keep your existing cards for the history.

Don't worry about paying of the government student loans any earlier than needed. Your interest payment it probably set to at or near prime, and the interest you pay should be tax deductible (check your loan documentation to confirm.)

I'm still paying off the silly thing now 7 years after graduation. I would only pay it off if the $90/mo payment impacted my TDS ratio, otherwise it just gets paid off whenever.

For investments, I would hold off on RRSP until you've paid off your non-student debt. If you have the discipline to pay those debts off first then perhaps set aside some cash via ING or something, you'll likely be able to contribute to your RRSP in a few years at a higher marginal tax rate (hoping you get reasonable raises.)

For choosing which debt, you'll have to see if yout LOC is a locked LOC or whether it's a real one. (If it's locked, everything you pay off you can't borrow back, if pay off $300 of the $6000 debt, and your LOC credit limit drops to $5700 instead of $6000.) To make sure you have cash flow, pay off the CC debt first, which i slikely to be at a higher rate anyway.


And, as always... being debt-free is nice, but this society encourages and embraces debt. If you can handle it responsibly, it's often better to have, use, and leverage debt to your advantage.

Government student loans are prime +2.5%

Not necessarily. Mine was fixed at 6% for five years, and has been variable at prime+0.5% since then.

Is this for a Canada student loan or a provincial one? Are things diff in Ontario than Alberta when it comes to student loans?

I'm thinking it's probably provincial. Here in Ontario, we have the OSAP. Not sure what the Alberta counterpart is.

EDIT: I went on google. ALIS?

EDIT2: BTW, here's the federal program: http://www.hrsdc.gc.ca/en/gateways/n...ram/cslp.shtml

Making a couple phone calls I've discovered that my Line of Credit IS in fact locked as of July 1, 06 at a rate of Prime + 1%. My government student loan is also at Prime + 1%. My credit card rate is lower than both due to the balance transfer. It also seems that I can convert cards within the same bank and maintain the credit history.

I definitely want to get rid of that locked line of credit debt, and then perhaps converting it to personal one. I'll most likely just keep my existing bank credit cards, and perhaps convert them as I don't want to apply for any more credit cards for now. In terms of investing the money I guess I'll look into what's out there, maybe put some more in the stock I'm in as its at a good price.

Does anyone know what a good % of debt you should have compared to your Income, or assets? Thanks for the replies.

RRSP will be useless for this tax year as you will prob take a whole chunk of taxes off with your tuition. Remember you contribution limit is also based on the previous earning period (not current)

Pay off your debts if you can.