Canadians keep increasing their consumer debts

While it’s been already about 20 months since we’ve seen borrowing costs cut sharply when the COVID-19 pandemic started, a recent survey shows that Canadians are still taking advantage of cheap money.

According to MNP Consumer Debt Index, 58% of Canadians will probably increase their consumer debts before the end of 2021. The firm worries about the “riskier methods” consumers may use to do it.

The results show that 37% out of those who plan to raise their debts, already have a balance on their credit card. MNP says 22% of Canadians plan to use Buy Now Pay Later options, which have become even more popular during the pandemic. In addition to it, 22% of respondents are considering purchase finance options, 15% will probably get another credit card, and 9% are thinking about a pay day loan.

“’Buy now, pay later’ options, payday loans and credit cards are extremely popular among consumers with financial issues”, – noted Grant Bazian, president of MNP. “Canadians need to understand that all those credit variants benefit the lenders the longer that people remain in debt due to high interest rates and different fees for processing and/or late payments.”

Amid historically low interest rates, Canadians are taking advantage of raising their debts, with the majority of poll respondents saying low rates allow them to make purchases they couldn’t otherwise afford.

However, consumers know it can’t last forever: 35% of respondents are worried that higher interest rates may lead them to bankruptcy. At the same time, 46% said they are within $200 or less away from not being able to service their debts.

“Yes, debt can be quite a useful tool, but every time you get a loan, you are facing a financial risk. Interest rate hikes, unexpected income loss, emergency expenses or life-changing events can make it almost impossible to pay off your debts”, – said Bazian.

The poll was conducted by MNP during the period from September 3 to September 7, with 2,001 Canadians over the age of 18 being surveyed. The margin of error is 2.5% (19 times out of 20).

Now is a perfect time to revisit your budget and concentrate on high interest debt payout while mortgage rates are still historically low. We are helping hundreds of clients every year to lower their monthly payments by including high interest payments into one affordable mortgage payment and releasing lots of cash every month to cover other needs.