Personal Finance By Mike Bergeron 242 Views

What Does It Mean to Be in Debt in Canada?

Debt is a problem faced by many Canadians, but what does it mean to be in debt, really? It may seem like an odd question to ask. After all, if you’re deep in debt, it should be obvious, right? Not necessarily. For many, carrying debt is just a fact of life, so much so they've become desensitized to it and don't even realize they might be in trouble. So let's cover the warning signs that you're in too much debt! Many people struggle with credit card payments, student loans, inherited debt, and other balances owed. And, they don’t really think they’re that deep in debt. In fact, Canadian consumers are now carrying close to $2.1 trillion in debt (mainly due to mortgages) which is almost a 5 percent increase from last year. So for many Canadians, being in debt is considered to be "normal" even if it means struggling to make ends meet every month.

What Does It Mean to Be in Debt in Canada?

What does debt mean? At its most basic definition, debt is money (or something else of value) that is owed to another person or legal entity, like a company. So, you could say that being in debt means you owe something of value to someone else.

However, the reality of being in debt goes beyond that simple definition. For many, being in debt is a constant factor influencing their life choices — something that makes it harder to live a free lifestyle where they can pursue their dreams and passions. (We see it all the time at Credit Canada.) 

For some, being in debt means:

  • Constantly having to fear phone calls from collection agencies;
  • Worrying about whether they’ll ever get approved for a mortgage;
  • Not being able to sleep, worrying about bill payments and other financial obligations;
  • Not having easy access to affordable financial services.

Thankfully, there are ways to get out of debt, end collection calls, and improve your financial health!

You’re Not Alone: Many Canadians Are in Debt!

So, how many people are in debt in Canada? According to the 2019 Canadian Financial Capability Survey (CFCS), nearly three-quarters of Canadians reported having some form of debt or used a payday loan. Of those, about a third reported they had too much debt.

Of course, not all debt is bad. Many people included in the survey either had minimal balances owed or were carrying a mortgage. (A mortgage is sometimes considered "good" debt because a home increases in value over time.) However, the nearly one-third of Canadians who said they owed too much shows that, if you’re in debt, you're definitely not alone.

But, how do you know if you owe too much money to creditors?

How to Know You’re In Too Much Debt

Most Canadians carry some form of debt, whether it's a credit card, a line of credit, or a mortgage. But it might not always be clear as to how much debt is too much debt. Luckily, there are warning signs. Some of the warning signs of problem debt include:

Not Being Able to Afford the Monthly Minimum Payments and Basic Necessities

One of the most obvious signs that you’re carrying too much debt is if you find yourself unable to pay both your monthly minimums and the costs for basic necessities (like food and shelter). For some, this may be the final warning sign they need to start looking for ways to eliminate debt

In extreme cases, the bills can start piling up faster than they can be paid. This can be incredibly stressful for anyone. So, it's important to seek help if you start falling behind. Remember: there’s no shame in asking for assistance when you need it!