3 in 10 Canadians say they are already insolvent MNP reports

Canadians increasingly pessimistic about their debt report says

3 in 10 Canadians say they are already insolvent MNP reports
Steve Randall

The peril that many Canadians are in because of their high debt burden has been highlighted in a new report.

The quarterly MNP Consumer Debt Index released Monday (Jan 20.) shows a decline in sentiment with a 5-point drop since the end of the third quarter, matching its lowest ever reading.

Three in 10 Canadians say that they are already insolvent and half say that they are $200 or less away from being insolvent at the end of the month.

“Our findings may point to a shift among some Canadians from debt apathy to debt hopelessness,” says Grant Bazian, President of MNP Ltd. “Feelings of hopelessness can make people feel like giving up on ever paying down their debt or, worse, ignoring the debt as it piles up higher.”

The situation is likely to worsen as almost half of respondents said they aren’t confident they will be able to cover their family and living expenses without going further into debt this year, up 2 points since September.

And Canadians not only feel that they are struggling but also that they are worse off than they used to be. One in 5 respondents said their situation is worse than it was 5 years ago.

“It is stressful for those who come to the alarming realization that there is no clear path to repay what they have borrowed, no matter the time horizon or interest rate,” says Bazian.

Breaking the cycle
Bazian says that going further into debt is a recipe for trouble especially with house prices rising. He urges those struggling to get professional help.

“Anyone using any kind of credit to make ends meet should sit down with a licensed professional to review their finances, create a budget and make sure they have a plan in place that will allow them to weather rainy-day expenses,” he said.

The fragile nature of so many Canadians’ finances becomes even more critical when put into context of an unexpected expense.

Only 27% of respondents are confident in their ability to cope with a life-changing event such as a serious illness, the loss of employment, or change in wage or seasonal work without increasing their debt load.

“Breaking the debt cycle means not only paying off your creditors, it also means changing your mindset and behaviors to avoid getting back into the same trouble in the future,” says Bazian.

He said that too many people leave it too late before trying to sort out their failing finances.

“Often by the time clients arrive in our offices they have been struggling unnecessarily with their debt for years – even decades,” he explains. “If debt is causing stress or impacting relationships, it’s time to get some support. Don’t wait,” he said.