Household debt in Canada is alarmingly on the rise. Much of the rise can be attributed to the uneven distribution of the impacts of the coronavirus. Certain industries have been decimated by COVID-19 restrictions and lockdowns, affecting both workers and small business owners in hospitality, tourism, food and beverage, entertainment, and more, and some of these industries haven’t even begun to recover.
While other Canadians have been saving more money during the pandemic as opportunities for shopping and going out have been limited in the last year, many are still struggling with job loss, reduced income, or reduced hours. Some are even being told that they may have to repay thousands of dollars in benefits that they received throughout 2020.
Why You Should Use Canadian Debt Consolidation
Job loss and reduced hours put a strain on your household budget. You still have to keep up with your everyday expenses like rent or mortgage payments, utilities, groceries, and more. Now that the Canada Emergency Response Benefit (CERB) has been replaced with Employment Insurance benefits, Canadians who are out of work may be receiving less.
When people need to stretch out their budgets, they turn to debt. They might put everyday expenses on their credit cards and not have enough to pay off the balance at the end of the month. They might rely on a line of credit for major expenses like car repairs or home maintenance. They might even turn to a payday lender if they have no better options.
Mounting debt quickly becomes a problem, but debt consolidation in Canada can help. Debt Consolidation Programs are offered by certified Credit Counsellors from non-profit credit counseling agencies like Credit Canada. Here’s what happens in debt consolidation:
- A certified Credit Counsellor negotiates with your creditors to reduce or eliminate interest rates on what you owe;
- You only have to make one monthly payment on consolidated debt;
- You avoid bankruptcy;
- You don’t have to put up with collection calls;
- You get advice on money management and paying back what you owe;
- You set a completion date, so you know when you’ll finally be free.
Debt consolidation in Canada makes getting back in the black more manageable.
The Rise of Coronavirus Debt
Coronavirus debt has become a major problem for Canadian households. The average debt-to-income ratio was 175% at the beginning of the year, which means that for every dollar of after-tax income Canadian households made, they owed $1.75.
The average actually went down in the second quarter of 2020, but that can largely be attributed to CERB payments and cross-country lockdowns that limited spending opportunities.
For families that saw their income interrupted, the situation has only gotten worse. If there is any good news, it’s that the debt-service ratio, or cost to service debt, is cheaper than it’s been in years. But when you’re talking about high-interest loans like credit cards, interest rates are still remarkably high.
Explore your debt consolidation options and get a handle on coronavirus debt before it’s too late.