Canadians' debt doubles in a decade

Canadians' debt load doublesThis year may have started with a record breaking stream of gold medals for the Canadian Olympic team, but most Canadians will not get a gold medal for managing their personal debt. Recent statistics confirm that individual personal debt has doubled over the past decade, while incomes have not.

In 2000, the average Canadian held $20,000 worth of debt, according to an article on Bankruptcy-Canada.ca. Yet that number jumped to at least $40,000 in 2010, while most incomes have failed to keep up. In fact, with the average cost-of-living raise hovering around 2 per cent, the raise in debt levels is astounding. What it comes down to is an alarming case of struggling to pay off debt while attempting to hold onto a job in this tough economic environment.

At the end of September 2009, the average Canadian adult was carrying household debt of 140.8 per cent of their personal disposable income. Three years ago, the level was at 120 per cent. For every dollar an average Canadian makes, they have $1.41 in debt.

During the current recession, debt continues to increase at an alarming rate, and Canadians are spending more of their hard-earned dollars in an attempt to pay down those debts. Due to the poor economic climate, 2009 was a record year for the number of personal bankruptcies filed in Canada.

As the recession continues, we continue to borrow at record levels. The reasons may be as simple as a job loss, or perhaps taking advantage of record low interest rates to finance a mortgage. Low interest rates may also be why more Canadians haven't filed for bankruptcy. Low rates keep payments smaller. Mortgage and consumer loan rates are actually lower now than they were three years ago. You can imagine the deep plunge into the abyss if interest rates were to skyrocket. Suddenly, many more Canadians would be lining up to sign on the dotted bankruptcy line.

If you are unable to make payments, then you could find yourself in a deep financial pit. But if you have a mortgage and car loan, and have a steady job that seems to weather the layoff tides, then you are servicing the debt you have.

While every Canadian is feeling pretty good about the outcome of the Winter Games, now is the time to start feeling good about our finances again, and taking action in getting our debts under control.

Written by Melanie Dixon.
Published March 5, 2010

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