July 24, 2013

By Margaret H. Johnson

In an article published in the Globe and Mail, according to Trans Union the average Canadian’s non-mortgage debt – which includes credit cards, car loans, instalment loans and lines of credit – reached $26,935 in the first quarter - down 2% since the third quarter in 2011.

Sounds good right? Well, I’m not sure. You can see it’s a bit of a stretch to reach into the statistical tables and find some event in the third quarter of 2011 to justify something.

The Bank of Canada’s seasonally adjusted figures for consumer debt have consistently gone up since September 2011 from $496 billion to $514 billion in March 2013.

The debt picture looks quite a bit different if broken down to individual averages. $26,935 doesn’t seem that much. $514 billion sort of catches your attention. We also don’t know who owes this money. What income groups bear the debt burden? I think the wealthy or higher income groups would pay their credit card balances off every 30 days.

Trans Union reported that the average Canadian paid approximately $1,398 in interest per year on their lines of credit. If the prime rate were to increase by 100 basis points, the yearly payments would rise by $350. However, if the prime rate goes up, interest rates go up all over – credit cards and mortgages and hence the monthly payments would drain much needed discretionary income from the family budget.

In fact, interest becomes a serious impediment for many individuals and families from getting out of debt. Perhaps this helps explains why the debt levels keep going up – and never down.

An interesting statistic suggests that 39.7 per cent of all consumer loan balances, excluding mortgages are lines of credit. Of course, this leaves the question, what about the remaining 60% of the consumer debt. It would be most informative to know how much of this debt is high interest bearing credit cards, car loans and personal loans.

From my point of view, debt is not down but creating havoc throughout Canadian households. In April 2013 the Globe and Mail Dawn Walton reported “that sky-high consumer debt is a disturbing sign of the times and that a growing number of Canadians are looking for help – only to find themselves even further in the hole after getting involved with unscrupulous advisors, counsellors, or debt settlement companies. For further information see the link below.

 

 

For people looking for a reputable credit counsellor be careful as there are a few bad actors. Any agency or person promising a fast and easy end to your debt problems is a promise too good to be true.