Access to credit eases Canadians into record debt

The fact that Canadians are carrying more debt than people in any other advanced nation comes as no surprise to a local bankruptcy trustee. Doug Hoyes says easy access to credit is what has been fueling the economy for the past 20 years which is why most of us carry several credit cards today along with our lines of credit, mortgages and car loans. And Hoyes says there's nothing particularly wrong with the debt, provided our incomes continue to increase and interest rates remain relatively low. But as soon as either variable changes, danger signs emerge.

The report by the Certified General Accountants Association of Canada finds that household debt reached $1.41 trillion in December 2009. That's $41,740 on average per Canadian and is worst among 20 advanced countries in the OECD. The accountants note that Canadians kept adding on debt during the recession when interest rates were at record lows. Now, with higher rates expected, they warn that those households would need to tighten their belts if mortgage rates rise even by just two percentage points.

The report says mid-income and even higher-income households would have to cut their budgets on other expenses by between nine and 11 per cent to maintain the same levels of spending on shelter, food and transportation.

Hoyes tells 570 News the question we need to ask ourselves is if we were to lose our jobs tomorrow, or our hours were to be cut back, would we still be able to service the debt that we have? And if we're living pay cheque to pay cheque, Hoyes says that's a warning sign to start taking action now to reduce expenses in case the unforeseen happens. Hoyes points out there are options if we feel overwhelmed by debt, including not-for-profit agencies such as the Mosaic Counselling and Family Services Centre which can offer budgeting advice and plans to deal with creditors. Beyond that, you can consider a consumer proposal which is offered through Hoyes-Michalos. Hoyes says the consumer proposal is a deal that is proposed to creditors whereby you can pay back a portion of your debt. It's not good for your credit, according to Hoyes, but it gets you back on your feet.