Canada’s personal debt load could lead to a scanty retirement, fear some advisors
As three-quarters of Canadians say they are up to their eyeballs in personal debt owing an average of almost $16,000, according to a new Ipsos-Reid survey, conducted in late August.
Personal debt load – which includes credit cards, loans and personal lines of credit, but excludes mortgages – has spiked from $2,779 to $15,920 this year compared to 2012, according to RBC’s annual debt poll, released Tuesday.
“People are looking at lines of credit in the wrong way,” says Marta Stiteler, an independent financial advisor in Toronto. “They (lines of credit) don’t have a beginning, middle and end. They have a beginning and a middle that goes on and on forever.”
Stiteler feels borrowers have conveniently forgotten that the balance on a line of credit is debt incurred and interest rates will fluctuate over time. “It’s as if they (borrowers) think they have an ethereal amount of money. But, they have to pay it back,” she says. “They are not thinking about what happens when interest rates go up. What’s wrong with an old-fashioned emergency fund?” (continued on Page 2.)