Debt Help Canada: How Your Finances Compare to the Average Canadian

Financial management is not always the easiest. With a soaring cost of living, unstable income, and unexpected bills, debt can pile up fast. But how do your finances stack up to the average Canadian? Learning if your situation compares to the average can be a valuable comparison tool (and a great way to see if debt relief is necessary). So let’s talk about Canadian household debt, how to determine if you are possibly insolvent, and when to get debt help in Canada.

Canadian Household Debt: A Growing Issue

As interest rates and inflation eased, more Canadians turned to borrowing and credit in the third quarter of 2024, driving total consumer credit debt to a record $2.5 trillion—a 4.1% increase from the previous year. In other words, Canadians have large outstanding balances with instruments such as credit cards, loans, lines of credit, mortgages, and other forms of long-term debt.

Canadians are also venturing into digital assets like cryptocurrencies. While these investments hold a high potential for wealth growth, credit cards or loans to fund these speculative investments add a layer of financial risk.

Clearly, we use debt to build wealth in Canada, so when you look at your personal finances, it is essential to know if your debt is sustainable and healthy. If you find it hard to pay your bills or borrow to cover your living expenses, you are closer to insolvency than you might think.

Average Debt in Canada: What Does It Tell You?

The average debt for the typical household in Canada often breaks down into the following categories:

• Credit card debt: The average Canadian credit card balance in Q3 of 2024 reached $4,562, marking a 6.97% increase from the previous year.
• Auto loans: In Q3 2024, the average auto loan balances ended at $25,644, representing a 4.7% year-over-year total jump as average loan amounts increased.
• Student loans: This is a commonly held debt for Canadians. With stats covering a 20-year reference period, more than half of all Canadian graduates can typically owe student debt (education-type and time-dependent).
• Personal loans and lines of credit: Stats show around 4 million accounts for lines of credit in Q3 of 2024 with an average balance of $39,403.
• Mortgages: The average mortgage balance hit $359,000 in the third quarter, an increase of 3.3% year over year.

Insolvency: When You Are No Longer Capable of Paying

If you have egregious debt in one or all of the above-listed categories and can’t pay your bills, then you might be insolvent.

A debt calculator helps you estimate your monthly payments for various debt repayment options, including debt consolidation loans, credit counseling, Consumer Proposals, and Bankruptcy. By inputting your debt amount, interest rate, and repayment period, you can assess your payment amounts, compare that amount to the Canadian average, and explore solutions for managing your unsecured debt.

Money Management: The Secret to Debt Trouble Prevention

One of the best ways to stay away from finance issues is through good finance management. Here are some suggestions to help you manage your finances better:

• Track your expenses: Use a monthly budget to keep track of where you spend your money. Determine where to cut back on unnecessary costs such as subscription services or impulse buying.
• Prioritize high-interest debt: Pay off the credit cards and other high-interest loans first to save money in the long run.
• Automate savings: Set up automatic transfers to a savings account, that way save for future goals like retirement, a home down payment, or an emergency fund.

Debt Management: Taking Your Finances Back in Hand

If your debt is already unmanageable, it’s time to look for debt help in Canada. Your first step? Find a Licensed Insolvency Trustee (LIT). An LIT can advise if debt relief solutions like a Consumer Proposal or Bankruptcy are the best option for you.

A Consumer Proposal is a formal, legally binding process that allows you to repay debts for part of the amount you owe. It is less damaging to your credit rating than Bankruptcy.

Bankruptcy, on the other hand, involves selling assets and paying off your creditors with the proceeds. It is a more drastic measure, but if your debt is unmanageable and other options are not available to you, it is an option.

Both of these solutions will impact your future finances, so it is prudent to weigh the benefits and the disadvantages. Consult a LIT before making a decision.

Steps You Can Take Today

If you are at the stage where you need help, Here is your step-by-step easy plan:

• Assess your finances: Use an insolvency calculator to measure your debt compared to the Canadian average.
• Create a budget: Outline your income and expenses, and determine where to cut back.
• Seek help: If the debt is overwhelming, seek the assistance of a Licensed Insolvency Trustee to explore the possibility of a Consumer Proposal or Bankruptcy.
• Commit to your financial future: Build good habits with the support of a professional. Remember, you’re not alone. There are plenty of Canadians with debt concerns—and everyone can find help with an LIT.

The Path to Financial Freedom

In truth, being aware of your financial position and doing something about it can be very rewarding. Good money management, staying current on your finances each month, and seeking debt help in Canada can bring freedom.

If you’re willing to take the first step toward rebuilding your finances, contact John Adamson and Associates for debt relief today. We will work together to determine the best path for your situation and begin your journey to financial well-being.