HUNTSVILLE, ONT. – Low rates and rising costs are pushing more Canadians into debt.
The latest MNP Consumer Debt Index report found that borrowing intentions are on the rise as many Canadians are just looking to make ends meet, and borrowing has taken on a riskier tone as consumers seek to fund. their buying habits over the next few months.
Almost six in ten respondents (58 percent) say they are quite likely to borrow more money before the end of the year. That number includes the 37 percent who are inclined to take on more debt on credit cards that already have a balance.
What worries me is the idea of buying now and paying later. This type of activity peaked during the pandemic with an increase in online shopping coupled with financial instability.
However, this move could prove to be very costly.
Buy now, pay later, payday loans and even credit cards may seem attractive at first glance, but the devil is in the details. These types of payment options favor the lender, not the consumer. They are designed for businesses to make money at your expense.
The longer you stay in debt, the higher your interest charges will be and the more the loan or advance will cost you. Add to that the transaction processing fees and possible late payment fees if you miss a payment, and it can start to look like a conspiracy to cost you dearly.
“The retail incentives of buying now and paying later may satisfy your need for instant gratification, but paying later is not always good value for consumers,” said Grant Bazian, president of MNP.
We have been lulled into a sense of complacency, with interest rates at rock bottom leading to purchases we know we might not otherwise have been able to afford. In fact, 58 percent admitted in the MNP survey that low interest rates gave them the ability to buy things they wanted but didn’t necessarily need.
However, the low interest rate sauce train will end.
We cannot ignore nearly half (46%) of those surveyed who said they were at $ 200 or less for not being able to meet their financial obligations, including the 27% who said they were not able to meet their financial obligations. are already not earning enough to cover the incoming bills and the payments of their existing debts.
Prices are on the rise and inflation has stubbornly persisted. Energy costs are skyrocketing and supply chains have been disrupted. All of these challenges increase the cost of goods and services at a time when some families live very close to the margins and struggle to make ends meet.
Low income Canadians are the cohort that worries me the most. It is not discretionary spending that could reduce them financially, it is the basics like food and shelter.
However, for others, the financial risk to Canadian families is real. Interest rate hikes are on the horizon as the economy gains traction. You could lose your job, have an unforeseen expense, or even have an upsetting event. Any of these life events could add significant financial stress to your household.
For those who continue to take on debt because they can, a word of warning. There’s one thing that could change your financial path: eliminate discretionary spending on things you know you can’t afford.