The top banks of Canada are hiking interest rates due to Canada’s quickly rising household debt problem.
According to The Bank of Canada, the average Canadian owes $21,000 in non-mortgage debt but some provinces are faring worse than others.
Alberta saw a rise of credit and car loan debt delinquencies after the 2015 oil slump and the average Calgarian now owes $28,000 in non-mortgage debt.
Karen Grey, a mother of two from Airdrie, is having a hard time improving her financial situation despite working full-time as a nurses assistant.
“There’s truck payments, a $1,600 mortgage payment, credit cards, groceries, school supplies and the list goes on and on,” Grey said in an interview.
Grey, who works at a unionized Alberta Health Services facility, grows concerned that her family might not be able to save much. Her kids don’t get the opportunities for sports or activities that other kids do, because of the tight budget.
“You’re nervous all the time when you’re living paycheque to paycheque. You can’t relax,” said Grey.
Others choose a different path, like applying for multiple credit cards, taking out high interest auto loans and getting stuck with pawnshops or payday loans.
A payday loan of $1,500 or less must be repaid within two months and a government survey estimates Alberta has about 240,000 payday loan holders borrowing about $500 million a year.
The good news is that since the Alberta government enforced its new law on predatory lending in 2016, the number of payday loan stores has declined significantly.
A former student, who spoke on the condition he not be identified, knows all too much about credit debt and the troubles it can cause.
“I took out a few credit cards, didn’t use them much for a couple of years. I moved out of my parents and lost my job eventually but it didn’t stop me from having $20,000 in credit card debt, a $25,000 car loan and student loans on top of it as well,” the ex-student explained.
In the end, he resorted to selling his electronics to pawn shops to pay his bills, only to buy them back later.
“When I found more work I started to take out payday loans. I then realized I had a serious spending problem that needed to be fixed.”
The former student went to Money Mentors, where he received guidance on how to crunch his debt and save money.
“They essentially taught me life skills I had never bothered to learn. I’m still making payments but I’m not up to my neck anymore.”
Money Mentors is an Alberta non-profit credit counselling agency which helps people learn to manage their debts.
They examine finances to figure out where the money is actually going and make a consistent budget that people can follow to curb their high interest payments and debts.
They find solutions like cutting unnecessary expenses, trading expensive vehicles in for a cheaper model, cancelling gym memberships, and eating out less.
According to a quarterly MNP debt survey, one third of Canadians are concerned about their levels of debt, 55 per cent are unsure if they’ll have enough for retirement and 33 per cent think rising interest levels could push them to bankruptcy.