Personal loans have come a long way since the 1990s, when the first large national surveys of consumer debt showed Canadians were saddled with a staggering $10-billion of credit-card debt.
Today, Canadians owe $21-billion on credit-cards, according to the Bank of Canada, more than credit cards have been owed since they were introduced in the 1920s.
In 2016, the Canadian Centre for Policy Alternatives found that the average debt load for people with a home mortgage was $100,000, or more than $2,000 a day for someone with no student debt.
The latest numbers from the federal government are a bit better, with debt loads in 2017 reaching $26,000 for a family of four, but still far below those of a generation before them.
But personal loans remain a big part of Canada’s overall debt burden, with some experts saying the average Canadian will never be able to repay the debt they’ve accumulated, as long as they stay in the labour force.
“A debt is a debt,” says Peter Hartley, a credit-lending specialist with the Canadian Association of Community Financial Advisors.
“You’ve got to find ways to make it better.”
The good news for those struggling with personal loans is the government has recently begun allowing some lenders to waive the interest rates on some loans, allowing them to charge higher rates than the average consumer.
As of March 31, 2017, lenders can now waive the minimum payment of 15 per cent on all consumer credit-scoring products, including credit cards, car loans, mortgages and payday loans.
This could save Canadians from $9 billion in interest payments, according the Credit Card Industry Association.
But as it stands, the federal loan-waiver program only applies to commercial lenders, meaning they can’t help with the small percentage of Canadians who still need help with their debts.
Some experts say that could change, with more lending opportunities opening up for consumers, and as the cost of borrowing continues to rise.
“There’s more interest in being able to offer low-cost alternatives to credit cards and mortgages,” says Andrew Reimer, a partner at Credit Counseling, a Toronto-based financial-services company that advises consumers on the best way to handle personal debt.
But not all experts agree with that.
“People don’t need to take a loan out to get ahead,” says Rick Edwards, president of the Canadian Credit Association.
“If you’re struggling with credit, you’re not going to get a loan, you are not going get a mortgage.
“But it’s the best thing for them. “
In the long run, we’re going to see a lot of Canadians struggling,” he says.
You can get a job, you can pay bills on your credit card, you don’t have to pay any interest on your loan.” “
The good news is that in a lot if not most cases, you’ll be able make it on your own.
You can get a job, you can pay bills on your credit card, you don’t have to pay any interest on your loan.”
And, of course, if you can, you could use the loan to buy a house, or at least a bigger one.
The good thing about the government loan waiver program is it’s not mandatory, and that’s because it’s a voluntary program, says Rick Evans, executive director of the Centre for Consumer Information and Insurance Oversight.
“It’s not something that is mandated by the federal or provincial government, it’s something that you can do, and I think that’s a positive,” he said.
“Some people may be a little bit wary of this, because they may think that the government doesn’t want to give them a choice.”
What’s the difference between a credit card and a mortgage?
The difference between personal loans and credit cards is how the money is invested.
A credit card is a loan that is backed by your name, but is not insured against losses, says David Burtch, president and CEO of CAA.
A mortgage is a mortgage that is insured against loss, and is often paid back with interest.
But it’s unclear whether credit-score agencies, like the credit-reporting company Equifax, will allow you to see the actual value of a loan in your debt, or whether the government can provide a way for you to compare your debt with the value of your home.
If you want to compare the value in your credit score with the debt in your home, you need to do some calculations.
For instance, if your home loan is worth $1,000 and your credit-rating agency says it’s worth $200,000 with a 2.67 per cent rate of return, that’s $10,000 in debt.
On top of that, you also have to add the value on your mortgage.
For example, if a credit rating agency says you’re earning on average 6 per cent interest, and you’ve borrowed $500 to pay it off, that adds up to $2.2, or $2 per cent of the loan