Low interest rates and rising costs leading many Canadians down ever-riskier path to borrow more

2021-10-04   minute read

Grant Bazian

MNP Consumer Debt Index

Six in 10 Canadians likely to pile on more consumer debt before the end of the year, including one in five who will use buy now, pay later options.

Canadian flag in front of parliament building

CALGARY, AB – October 4, 2021 –The latest MNP Consumer Debt Index raises red flags about Canadians’ plans to borrow more – and in potentially riskier ways – to make ends meet or finance their purchasing habits over the next few months.

Six in 10 (58%) are at least somewhat likely to borrow more before the end of this year, including nearly four in 10 (37%) who say they’re inclined to use a credit card that already carries a balance. Buy now, pay later (BNPL) options which have boomed alongside the pandemic-induced spike in online shopping and financial instability will likely be the method of payment for one in five (22%) Canadians this fall. Around the same number (22%) are looking at purchase finance options, and one in 10 (9%) are considering a payday loan.

“Buy now, pay-later options, payday loans, and credit cards are particularly attractive to those with tight finances, but the payment terms, fees, and interest charges are largely underestimated or misunderstood,” says Grant Bazian, President of MNP LTD, the country’s largest personal insolvency firm. He cautions Canadians about the allure of borrowing more through quick credit and BNPL options increasingly touted by online retailers.

“Retail incentives that offer the instant gratification of buying goods now and paying later are not always good value for consumers,” he warns. “What Canadians need to remember is lenders benefit the longer that people stay in debt because of the high interest costs and various fees for processing and/or late payments.”

Rock bottom interest rates have left Canadians feeling more comfortable with increasing their debt. Notably, half (49%) say they’re more relaxed about carrying debt than they usually are with interest rates so low — up four points since last quarter. Moreover, six in 10 (58%) say low interest rates provide them with a good opportunity to buy things they otherwise couldn’t afford.

Perhaps drawn to the ability to make purchases otherwise beyond their means, young people are more likely to use BNPL options, with four in 10 (38%) Gen Z and three in 10 (27%) millennials considering doing so before the end of the year. Gen Z and millennial Canadians are also much more inclined to say they are at least somewhat likely to use a payday loan service (24% and 13% respectively).

But Canadians also know the low-interest gravy train must end at some point. With nearly half (46%, -2pts) reporting they are $200 away or less from not being able to meet all their financial obligations — including 27 percent who say they already don’t make enough to cover their bills and debt payments — it’s no surprise the majority (52%, +2pts) are concerned about the impact of rising interest rates on their financial situation. One in three (35%, +1pt) are worried rising interest rates could move them toward bankruptcy.

“Debt can be a useful tool, but you’re taking a financial risk every time you borrow. Interest rate increases, unexpected income loss, emergency expenses, or life-changing events are all potential outcomes that can make debt repayment next to impossible,” says Bazian.

With uncertainty around the fourth wave of COVID-19, Canadians express some concern about their ability to cope with life changes without increasing their debt load. A growing proportion says they could not financially cope with an unexpected auto repair (21%, unchanged) or having an illness and being unable to work (28%, +1pt). Three in 10 (30%, +3pts) express a lack of confidence in their ability to cope financially with a loss of employment or a change in work without going into debt.

“In addition to the financial turmoil brought on by the pandemic, another issue we see in our research is households are struggling with the rising cost of living. With the price of necessities increasing, some may take on more credit to make ends meet while others will have less room in the budget for debt repayment,” says Bazian.

Affordability concerns are widespread across the country with a large proportion holding the opinion that life’s necessities have become less affordable over the past year. Forty-five percent say it is becoming less affordable to feed themselves and their family. One in three say housing costs are less affordable and around the same number (36%) say clothing or household necessities and transportation (33%) are costing more. More Canadians also say it’s becoming less affordable to put money aside for savings (40%) or towards their debt (29%).

“Unmanageable debt is stressful enough. When there is already virtually no wiggle room in the household budget and the cost of living rises, people can start to feel hopeless. Anyone in this situation needs to know there is professional debt help available. Licensed Insolvency Trustees are qualified professionals, specifically trained to get you out of debt. The sooner you reach out, the quicker you will find relief from financial stress — and the sooner you can start working toward a financial fresh start for yourself and your family,” says Bazian.

Every Canadian can obtain a free and confidential assessment of their financial situation with a Licensed Insolvency Trustee. As the only government-regulated debt professionals, they provide a full range of debt relief options, including Consumer Proposals, informal debt settlements and Bankruptcies.

Now in its eighteenth wave, the MNP Consumer Debt Index currently stands at 95 points, down two points compared to the last wave conducted in June 2021.


MNP LTD, a division of the national accounting firm MNP LLP, is the largest insolvency practice in Canada. For more than 50 years, our experienced team of Licensed Insolvency Trustees and advisors have been working with individuals to help them recover from times of financial distress and regain control of their finances. With more than 240 offices from coast-to-coast, MNP helps thousands of Canadians each year who are struggling with an overwhelming amount of debt. Visit MNPdebt.ca to contact a Licensed Insolvency Trustee or use our free Do it Yourself (DIY) debt assessment tools. For regular, bite-sized insights about debt and personal finances, subscribe to the MNP 3 Minute Debt Break Podcast.

About the MNP Consumer Debt Index

The MNP Consumer Debt Index measures Canadians’ attitudes toward their consumer debt and gauges their ability to pay their bills, endure unexpected expenses, and absorb interest-rate fluctuations without approaching insolvency. Conducted by Ipsos and updated quarterly, the Index is an industry-leading barometer of financial pressure or relief among Canadians.

The Index has dipped by two points since last quarter to 95 points, having remained steadily below the established benchmark of 100 points for the last two years.

The latest data, representing the eighteenth wave of the MNP Consumer Debt Index, was compiled by Ipsos on behalf of MNP LTD between September 3-7, 2021. For this survey, a sample of 2,001 Canadians aged 18 years and over was interviewed. Weighting was then employed to balance demographics to ensure that the sample’s composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.5 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to, coverage error and measurement error.

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