CALGARY, Alta., April 08, 2021 (GLOBE NEWSWIRE) – As pandemic financial support and loan deferral programs begin to roll out, MNP’s latest consumer debt index reveals the number of Canadians bordering on financial insolvency hit a five-year high threshold. More than half (53%) say they are $ 200 or less per month not being able to meet all of their bills and debt obligations each month, a huge 10 point jump from December . This includes three in ten (30%, + 7pts) who say they are already insolvent and have no money at the end of the month to cover their payments.
“We have seen that financial assistance measures related to the pandemic have provided some leeway over the past year, but we are now seeing a reversal,” said Grant Bazian, president of MNP LTD, the most large insolvency company in the country. “The number of Canadians with virtually no wiggle room in their family budgets is at a five-year high. The anxiety Canadians feel about making ends meet – or being unable to do so already – tells us that we could eventually see an avalanche of households falling behind on their payments or defaulting on their loans. , mortgages, car payments or credit cards.
Conducted quarterly by Ipsos and now in its 16e vague, the index revealed that households report having less money at the end of the month. On average, Canadians say they have $ 625 left after making their payments, $ 108 or 15% less than in December. The drop is likely a reflection of government aid programs, eviction bans and debt relief granted by lenders which are now coming to an end.
“Some Canadians may see their bills fall due even if they don’t return to full-time employment,” Bazian says. “While some Canadians are spending less and saving more as a result of the pandemic measures, others are being pushed further into the red, taking on more debt to stay afloat after losing a job, losing a salary or a small business. “
A quarter (25%) of Canadians say they have taken on more debt as a result of the pandemic. This includes using their savings to pay bills (20%), using credit cards (14%), using a line of credit (7%), taking out a bank loan (3%) or deferral of mortgage payments (3%).
“Those who take on more debt are increasingly vulnerable to interest rate hikes in the future. They might find that their debt becomes unaffordable when this happens, ”says Bazian.
More than half (51%) are worried about their ability to repay their debts if interest rates rise. About four in ten (35%) fear that rising interest rates could push them into bankruptcy.
Despite the concern, six in ten (59%) think that with interest rates this low, it’s a good time to buy things they might not otherwise be able to afford (-2 as of December ). In addition, almost half (49%) say they are more relaxed than they usually are at the idea of taking on debt (+2 from December).
“Unfortunately, using credit is a reflex for many Canadians. For those affected, this is probably a good time to stop seeing debt as the solution when it can in fact become a trap, ”said Bazian, who urges Canadians to be proactive in improving their financial situation and to seek professional advice to help them deal with consumer debt.
The poll found that very few Canadians plan to seek professional advice (4%) or contact a Licensed Insolvency Trustee to discuss debt relief options (2%) in the next year. Instead, it seems many are planning to do exactly what Bazian warns against: taking even more credit to pay for their expenses. More than a quarter (26%) say they plan to take on more debt to pay their bills in the next year, including using high-interest options like credit cards (8%) or payday loan service (2%).
“I can’t stress this enough: People with high debt – especially those who take on more debt to pay their bills – should see a debt professional immediately. Bankruptcy is not the only option, nor always the best option for dealing with debt. Licensed Insolvency Trustees offer free, unbiased advice on your personal situation and the options available, ”Bazian explains.
Government-regulated Licensed Insolvency Trustees are empowered to help Canadians reorganize their financial affairs and, where appropriate, can even help them avoid bankruptcy by facilitating a settlement with their creditors. They can also provide legal protection against creditors through the consumer proposal or the bankruptcy process.
Bazian says that, depending on the extent of the debt and the person’s overall financial condition, a Licensed Insolvency Trustee may recommend one or a combination of the following:
|Budgeting – Set up a monthly financial plan to help balance and monitor income and expenses and potentially free up more money to pay off debt.|
|Refinancing – Renegotiate the term and interest rate of existing credit accounts to reduce the monthly cost of debt and facilitate their repayment.|
|Clearance – Sell high-value assets such as non-essential vehicles, recreational properties, sporting goods and jewelry to provide the financing needed to pay down debt.|
|Consolidation – Consolidate all debts into one monthly payment with a lower average interest rate to reduce the number of payments and their total cost.|
|Consumer proposal – Work with a Licensed Insolvency Trustee to negotiate a legally binding debt settlement with creditors that will reduce the amount owed and can be paid over a period of up to five years. Consumer Proposals can only be administered by Licensed Insolvency Trustees.|
|Bankruptcy – In cases where an individual’s wages have been garnished, or if they are threatened by a creditor and unable to make full or on-time payments by credit card, line of credit or loan, a Licensed Insolvency Trustee may recommend filing for bankruptcy. Bankruptcies can only be administered by Licensed Insolvency Trustees.|
“Everyone’s situation is different, which is why it is important to obtain personalized and impartial advice from a Licensed Insolvency Trustee. They are the only debt relief professionals in Canada who can offer the full range of debt relief options and help people with serious debt understand their rights and determine the best path forward, ”adds Bazian.
About MNP LTD
MNP LTD, a division of the national accounting firm MNP LLP, is the largest insolvency firm in Canada. For over 50 years, our experienced team of Licensed Insolvency Trustees and Advisors have worked with individuals to help them recover from times of financial distress and regain control of their finances. With more than 240 Canadian offices from coast to coast, MNP helps thousands of Canadians with an overwhelming amount of debt each year. Visit DebtMNP.ca to contact a Licensed Insolvency Trustee or use our DIY Debt Assessment Tools. For regular and in-depth information on debt and personal finance, subscribe to the MNP’s 3-Minute Debt Podcast.
About the MNP Consumer Debt Index
the MNP Consumer Debt Index measures the attitude of Canadians towards their consumer debt and assesses their ability to pay their bills, incur unexpected expenses and absorb fluctuations in interest rates without approaching insolvency. Produced by Ipsos and updated quarterly, the Index is an industry-leading barometer of financial pressure or relief among Canadians.
Now in its sixteenth wave, the index currently sits at 96 points, up seven points from the last wave conducted in December 2020. Visit MNPdette.ca/CDI to learn more.
The latest data, representing the sixteenth wave of the MNP Consumer Debt Index, was compiled by Ipsos on behalf of MNP LTD between March 4 and 9, 2021. For this survey, a sample of 2,001 older Canadians aged 18 and over was interviewed. The weighting was then used to balance the demographics to ensure that the composition of the sample reflects that of the adult population according to census data and to provide results intended to approximate the universe of the sample. The accuracy of Ipsos online surveys is measured using a credibility interval. In this case, the survey is accurate to ± 2.5 percentage points, 19 times out of 20, if all Canadian adults had been surveyed. The credibility interval will be wider among subsets of the population. All polls and polls may be subject to other sources of error, including, but not limited to, coverage error and measurement error.
Angela Joyce, Media Relations
e. [email protected]
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