A new report from credit agency, TransUnion, is reporting the level of Canadian consumer non-mortgage debt at the end of 2012 is up nearly six per cent from a year earlier. This puts Canadian consumer debt level at its highest peak ever.
The report says the average consumer’s total debt, not including their mortgage, rose to $27,485, a 5.9% increase from the $25,960 a year earlier. It was the largest percentage increase for a fourth quarter since 2009. Debt levels rose 2.7% in the fourth quarter of 2012 from the third quarter. Although increases in personal debt are uncommon during the final quarter of the year due to holiday season shopping, Thomas Higgins of TransUnion stressed, “The rise on a year-over-year basis should be more concerning as Canadians’ debt loads increased by more than $1,500.” The quarterly analysis estimates the average Canadian owed a total of $27,485 as of Dec. 31 for things like car loans and leases, credit cards and lines of credit.
If the priority for most Canadians is still to pay off their debt, so why has the debt load percentage climbed? Perhaps the increase reflects those consumers who simply cannot afford to pay off debt.
If the Bank of Canada has not increased interest rates, why are people having a hard time resolving their debt? In a recent NewsTalk 1010 radio segment, Gail Vaz Oxlade talked about the mess our financial institutions are in due to over-lending. Banks were handing out too much credit to consumers, many of whom were not in the position to pay it back at the time the loan was granted. As a result, many consumers became negligent with repaying loans and debt consolidations were more becoming frequent. In response, Moody’s has downgraded all the major banks, with the exception of Royal Bank. Feeling the pinch from this downgrade, banks like TDCanada Trust, CIBC and BMO is attempting to re-adjust by increasing bank fees and rates for credit cards and lines of credit to indebted consumers with less than perfect credit scores.
People are starting to see announcements on their bank statements regarding fee increases. Those who are seeking to pay off debt through consolidating their loans are now faced with higher rates. Ms. Oxlade stressed to consumers to regularly check their bank statements for any rate increases, including overdraft protection fees. One consumer she spoke to found out she was paying an extra $2/month for passport updates even though she has never used the service. Nevertheless, her bank will continue to charge this fee along with her other bank fees. Some consumers are now faced with increased interest rates from 9.75% + prime to 12.75% + prime for credit cards and lines of credit. The increased cost of borrowing is going to make it harder for consumers with a poor credit score to pay off debt. Talk about sticking it the indebted by keeping them in debt. I think Ms.Oxlade is right when she says, ‘the banker is not your friend.”
If you have trouble paying off your debts, applying for another bank loan to consolidate your debts may not be the answer. If you already have poor credit, debt consolidation may even cost you more in the long run. There is another option. An informal proposal by a credible and reliable debt relief company can be the answer to your debt trouble. OCCA Consumer Debt Relief offers a free financial assessment to determine how much you owe and how much you can afford to repay. We arrange a repayment plan tailored to your personal financial situation. Whether you are on a fixed income, or pension, employed, or out of work, OCCA will develop a plan that works for you. Another bank loan may not be the answer to your debt trouble. Take control of your finances and make the call to OCCA today. We are here to help!
Trackbacks for this post