Total consumer debt has risen despite clamp down on loans and credit cards

12 September 2013 - Which Way To Pay

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Watch Out! Canadians are borrowing more and more with bank loans and credit cards

Canadians are borrowing more and building on consumer debt with credit cards, lines of credit, car loans and bank loans. Numbers released last week show a number of troubling trends, reporting that Canadians have returned to their free-spending ways and seniors have joined the party by borrowing to finance their post-retirement lifestyle.

Despite a clamp down on loans and credit card borrowing total consumer debt rose

Equifax Canada conducted a report that shows despite recent efforts by policy-makers to clamp down on borrowing, total consumer debt in Canada rose $77 billion, or 6.1 per cent, in the second quarter of 2013 from last year, and by 6.5 per cent among those 65 and over. TransUnion now says it expects debt levels to continue to rise through the rest of this year, eventually reaching a new record high of nearly $28,000 by the end of this year.

Canadians will become vulnerable to an economic shock

Jeffrey Schwartz of Consolidated Credit Counseling Services of Canada says "Seniors are carrying more debt into retirement. They are trying to maintain a lifestyle they had pre-retirement but on post-retirement income, and if income has dropped, they are increasing their debt to cover off their spending. It's a very dangerous strategy." He added another possible cause is that seniors are supporting their grown children in greater numbers.

The Bank of Canada has been warning for a long time that as interest rates rise, many more Canadians become vulnerable to an economic shock.

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