The Debt Monster

More-debt 21% of Canadians have between $20,000 and $200,000 of non-mortgage debt. 

28% don’t even know the interest rate of their most-used credit card.

If this sounds like you, and you have over 20% equity in your home, debt consolidation may be worth a look.  A line of credit at or near prime rate (currently 6.25%) can often do the trick.  In some cases, though, it makes more sense to refinance your whole mortgage.

If you’re curious about your options, let a professional mortgage planner analyze your credit profile and see what’s right for you.

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  1. While debt consolidation can be very helpful in some situations, it definitely isn’t for everybody. Sure, 21% of Canadians with over 20K in non-mortgage debt sounds huge, until you think about it and realize that a large portion of those people have just financed a new car – nothing surprising or particularly out of the ordinary.
    The major problem with consolidating debt is that it makes it exceptionally easy to roll consumer debt (car loan, credit card, etc) into a mortgage or LOC, and then to rack up yet more consumer debt on the credit card.
    The only way to beat the debt monster is to work toward borrowing less money, not more. Debt consolidation only works if you eliminate the high-interest debts and keep them eliminated.

  2. That’s very true George, and a planner should stress these same principles to clients. The strategy is meant primarily to reduce high-interest burdens. Moreover, 2nd chances should never lead to 3rd chances. Refi’s/LOC’s should be a one-time solution only. Have a wonderful day, Melanie

  3. That’s interesting, with the population estimate at around 32.9M that puts the debt estimate at around 6,580,000,000,000 to 65,800,000,000,000. That’s if you only include the people with 20K – 200K of debt. Include all the mortgages and all the < 20K people and you have a huge debt load. I guess that's why banks/debt product marketers make so much money. . . . and wait a sec, isn't our GDP something like 1.5 Trillion? Our consumer debt is at minimum 6.5 Trillion? So even if all work in all of Canada went to pay off consumer debt it would take more than 4 years? Am I looking at that correctly, or do I have the GDP way off?

  4. Hi Traciatim, I didn’t see a breakdown of the absolute debt totals in Credit Canada and Capitol One’s report. However, 2006 stats show the average Canadian having about $29,000 in non-mortgage debt. If you therefore guesstimate that 21% in question have roughly $50,000 in non-mortgage debt (for sake of argument), then the total works out to roughly:
    32.9MM x 21% x $50K = $345 billion

  5. Oh right, I botched on the population percentage that have the debt and forgot to include it in the calculation one did it as if every person had that much debt. That looks much better than the 6.5 trillion that I came up with.

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