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Canadian Consumer Debt
Consumer debt levels across the world are climbing to never before seen rates, and Canada is no exception. A survey conducted by Equifax Canada (a credit reporting agency) says debt levels will reach a record $1.422 trillion in the fourth quarter of 2014.
However, though Canadians are in more consumer debt that ever, they are managing make payments more easily. Delinquencies are at an all time low with only 1.12% of Canadian debtors in arrears for more than 3 months at a time.
This does however raise the question of how much people are actually paying off. Making minimum payments on your consumer debt will stop delinquent accounts, but it won’t actually help pay down your debt in any meaningful way, especially on high interest consumer debt like credit cards. Regina Malina, director of modeling and Analytics at Equifax Canada says “some people are making minimum payments, others are making more. The key question is whether there is a tipping point in all of this”
Getting into a minimum payment cycle is often the first step down a treacherous path that leads to unmanageable debt. Interest continues to accrue, and if you aren’t paying off your principle then you can feel like you are battling against a tide of money problems which just keep growing. If too many Canadians are currently on this path many of them will eventually end up in a difficult situation and we could see much higher levels of delinquency in coming years.
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