BONOKOSKI: New credit card or personal loan not the answer

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MNP’s latest consumer debt index is warning signs everywhere, with 15% of Canadians reduced to believing that applying for an additional credit card is the way to make ends meet.

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Almost 20% are considering payday loans.

This paints a rather dark picture.

“Buy now-pay later” options, payday loans and credit cards are especially attractive to those on tight finances, but payment terms, fees and interest charges are largely misunderstood. Said Grant Bazian, president of MNP Ltd., the country’s largest personal insolvency firm.

He cautions Canadians against the lure of borrowing more thanks to quick credit options and the Buy Now and Pay Later (BNPL) offers increasingly touted by online retailers.

The story of the Debt Index Band is chilling, even more so amid the economic uncertainty created by the continuing pandemic.

Almost six in 10 Canadians (58%) are at least somewhat likely to borrow more before the end of this year, including almost four in 10 (37%) who say they are inclined to use a credit card that already carries a balance.

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Buy now, pay later options, which have exploded alongside the surge in online shopping and financial instability caused by the pandemic, will be the payment method for one in five Canadians this fall.

Plus, one in ten people are considering a payday loan.

Scott Gilmore of Macleans Magazine was mistakenly targeted by a loan company for debt owed by a person of the same name.

“It was weird to find a doppelganger and look at his life that way, in a voyeuristic way, but what blew me away was that I realized he was paying around 400% on that loan and that he clearly couldn’t afford it, “Gilmore wrote. “What I discovered about the state of the payday loan industry in Canada was mind-boggling. “

This led Stan Keyes, president of the Canadian Payday Loans Association, to argue that his licensed payday lenders “do not deserve the vilification they often suffer.”

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“No lender wants a borrower not to pay off the loan,” Keyes said. “And the law, the regulations in Ontario and all the other provinces, are very clear: an approved lender cannot extend the loan for a fee. “

Across the country, however, payday loan outfits with their flashy, unmistakable decor – often with two or three existing in the same neighborhood, usually in the poorest city blocks – herald the ease and convenience of borrowing. a few hundred dollars to get their customers through all week.

But it is the repayment part that can make these loans tricky. In Manitoba and Saskatchewan, it will cost you $ 17 for every $ 100 you borrow. The fees are $ 15 in Ontario and $ 15 in British Columbia and Alberta.

There are no great deals to be found.

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Then there are the online lenders with their pain-free arguments like borrowing $ 3,000 and “getting your no-obligation loan pre-approval in just three minutes.” A question about your loan? Chat online with our team of product specialists! “

It sounds like the answer to the desperate – it isn’t.

But Canadians, according to Bazian, “also know that the low-interest gravy train has to end at some point.”

“Debt can be a useful tool,” Bazian said. “But every time you borrow, you take a financial risk. Increases in interest rates, unexpected loss of income, emergency expenses, or life-changing events are all potential outcomes that can make paying down debt nearly impossible.

Too many Canadians, however, are already too far away.

Almost half said they are within $ 200 of insolvency.

Again, not a pretty picture.

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