Average non-mortgage debt on the rise in Canada
(TORONTO, ON) – The numbers keep on rising. Thanks to a bump in auto loans and instalment lending, Canadians now owe an average of $20,910 in non-mortgage debt – an increase of 2.7 per cent. Credit agency Equifax released their most recent debt report on Tuesday, showing that Canada’s love affair with debt is still alive and well.
Most major cities saw an increase in non-mortgage debt compared with the same time, last year:
|Q1 Debt – 2015||Q1 Debt – 2014||Change|
Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada, worries that increases in non-mortgage debt, combined with historically low savings rates, leaves Canadians in a very precarious financial position.
“We see a lot of Canadians walking the financial tightrope with heavy debt on their shoulders and no savings safety net to catch them,” says Schwartz. “A sudden job loss, a reduction in hours, illness or disability, and everything comes tumbling down.”
Balances might be increasing, but delinquency rates remain low, meaning Canadians are servicing their debts on time. While this gives the appearance that Canadians are responsible with their debt, Schwartz notes that there is a broad spectrum when it comes to credit card debt.
“There’s a huge gap between delinquency and wise credit usage,” notes Schwartz. “You could be paying your bills on time, but if you’re only making minimum payments on a large credit card balance, you’re merely treading water.”
In an effort to move Canadians toward the responsible end of the credit spectrum, Schwartz offers the following tips:
Limit car loan terms. Two-thirds of car loans in April 2015 were for terms of six years or longer. Buying too much car and dragging out your car payment over several years will see you pumping money into a rapidly diminishing asset. Choose a car that is well within your budget and limit the term.
Pay off credit card balances in full. According to the Canadian Bankers Association, 60 per cent of Canadians claim to pay their credit card balances in full. That means 40 per cent are carrying balances and paying high interest rates. Treat your credit card like a debit card – if you don’t have the cash in your bank account, don’t spend it.
Strategically pay off credit card debt. If it’s impossible to pay your balance in full every month, you need to employ a plan to help get you there. The most efficient way is to focus on paying down your card with the highest interest rate, then focus on the next highest, and so on. If you don’t have the cash flow to tackle your high-rate card, start with the card with the smallest balance and work your way up to the larger ones, knocking them off one card at a time.
Go on a cash diet. If you can’t seem to get ahead of your credit card balances, it’s time to go cold turkey with your credit card. Paying down your balance is much easier if you can freeze it; you can’t borrow your way out of debt. Leave your card at home if the temptation is too great.
Reach out for help. Much of this advice is easier said than done. Simply treading water will get you nowhere, and it may be time to reach for a lifesaver. Forget about the taboo of debt and talk to friends and family. Carrying the burden alone can be extremely difficult. For professional advice, reach out to a trained credit counsellor.
About Consolidated Credit Counseling Services of Canada, Inc.:
Consolidated Credit Counseling Services of Canada is a national non-profit credit counselling organization that teaches consumers about personal finance.
For more information or to request an interview with Jeffrey Schwartz, please contact:
Jacob MacDonald, Public Relations Coordinator, Consolidated Credit Counseling Services of Canada, Inc., T: 416-915-7283 ext.1041 , C: 647-390-5253 , F: 416-915-5200 , E: firstname.lastname@example.org