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Debt Loads Increases while Delinquencies see Decline

Just yesterday we talked about the most recent Equifax report which showed that our total debt loads as Canadians continue to increase. Highlighted in that report was a specific concern for senior citizens, the age group that took on more debt than any other this year when compared with last year. But is that really so bad?

The fact of the matter is that getting deeply into debt, especially when you can’t afford, should be avoided at all costs. Not only can it put you in a grave financial position, but it can also weigh heavily on the economy. When people are in too much debt, they’re too busy trying to pay it off, and so they stop shopping. Consumer spending was largely what got us through the recession; and it’s a huge boost that the economy really needs.

The key is knowing how much is too much, and making sure you pay off all your debts on time. To know how much that is on a national scale, you have to look at delinquency rates to see if we’re really doing that badly. As it turns out, we’re not.

While Canadians may have increased our debt load by 6.1 per cent when compared with last year, a look at the delinquency rate on that debt will show that the increase may be due to the fact that we can afford it. In the same Equifax Canada Q2 2013 National Consumer Trends Report, they showed that Canada’s delinquency rate has fallen to a record low of 1.19 per cent. And that may mean that the increasing debt load of seniors may not be that troublesome after all.

Finance Minister Jim Flaherty tightened mortgage lending requirements over a year ago, marking the fourth time he had done so in just as many years. The rules were put into place so that Canadians could get a handle on their debt and more importantly,to stop those who couldn’t afford it from taking on any more. And with delinquency rates lower than they’ve ever been, it seems as though they may just have worked.

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