Huntsville, Ont. Lower rates and rising costs are pushing more Canadians to borrow more.
The latest MNP Consumer Credit Index report finds that borrowing intentions are on the rise, as many Canadians simply look to make ends meet, and that lending is taking a riskier tone as consumers change their buying habits over the next few months. want to finance.
Nearly six out of 10 respondents (58 percent) say they are likely to borrow some more money before the end of the year. This number includes 37 percent who are willing to accumulate more debt on credit cards than those who already carry balances.
What worries me is buy now and pay later. This type of activity increased with the boom in online shopping coupled with financial instability during the pandemic.
However, this step can prove to be very costly.
Buy now, pay later, payday loans and even credit cards may sound tempting on the surface, but the devil is in the details. These types of payment options favor the lender, not the consumer. They are designed for companies to make money at your expense.
The longer you stay in debt, the higher your interest costs, and the more the loan or advance will cost you. Add to this the fee for processing the transaction and the potential late payment fee if you miss a payment, and it could look like a conspiracy to cost you a lot of money.
“The retail incentive to buy now and pay later may satisfy your immediate gratification need but paying later is not always good value,” says Grant Bazian, president of MNP.
We are steeped in a sense of complacency, rock-bottom interest rates that lead to purchases that we know we might not be able to afford otherwise. In fact, 58 per cent in the MNP survey admitted that low interest rates provided them with the opportunity to buy goods of their choice, but it was not.
However, the gravy train with the low interest rate will be scrapped.
We can’t ignore the nearly half (46 percent) surveyed who reported they were $200 or less away from not being able to meet their financial obligations, including 27 percent who say they’re already covered. do not make enough to pay their incoming bills and their current debt.
Prices are rising and inflation remains constant. Energy costs are rising, and supply chains are disrupted. All these challenges drive up the cost of goods and services at a time when some families are living very close to the margins and struggling to meet their needs.
Low-income Canadians are the group I am most concerned about. It’s not discretionary spending that can get them down financially, it’s the basics like food and shelter.
For others, however, the financial risk to Canadian families is real. As the economy accelerates, interest rate increases are on the horizon. You may lose your job, there may be an unexpected expense or even a life-changing event. Any of these life events can add significant financial stress to your household.
For those who continue to incur debt because they can, a word of caution. There’s one thing that can change your financial trajectory: eliminating discretionary spending on things you know you can’t afford.