The State of Canadian Household Debt

Dealing with household debt can be a major challenge for many Canadians. When saddled with excessive debt, it becomes extraordinarily difficult to save up for anything, like a getaway, car, new appliance, new gadget, or any other goal that requires a significant amount of money.

Thankfully, there are debt help options available that can help you get out of debt for good. It’s also important to understand the current state of Canadian household debt and what drives it so we can be better prepared to avoid debt in the future.

What Is Household Debt?

Before we begin examining the average household debt in Canada, it’s important to understand what it is and how it’s different from personal debt. One definition of the term "household debt" is that it's the combined liabilities “that require payments of interest or principal” of all members in a household. 

In other words, it's the total debt owed by every member of your household combined into one lump sum total.

The Current State of Canadian Household Debt

Wondering how much the average household owes or what drives debt in Canada? If you look up info on the web, you might find a ton of different (and even conflicting) articles trying to explain how much the average person or family owes and why. 

To help simplify your search, here’s a quick overview of some more current Canadian household debt statistics:

How Much Is the Average Household Debt in Canada?

The average consumer debt in Canada is hovering at about $20,739 (excluding mortgage debt); therefore, a two-person household could have close to $41,500 in debt. Of course, the debt of any given household varies depending on different factors. 

For example, if you rent rather than own your home, you can avoid mortgage debt. (When you include mortgage debt, the average consumer debt in Canada rises to almost $75,000.) Or, if you've recently fallen on tough times due to a job loss or other issue, you may find yourself adding to your credit card debt just to cover basic expenses.

So, if your household debt is starting to worry you or cause you stress, it’s important to remember that there are solutions. You can look into free credit counselling services, debt consolidation services, or other debt-relief options to help you get out of debt!

Driving Factors Behind Household Debt in Canada

What drives the average household to go into debt? There are many different types of debt that can contribute to what your household owes, such as:

• Secured Debt. This includes any type of debt backed by collateral that will be forfeited to the lender if the debt goes unpaid. The amount you can borrow is (usually) determined by the value of the asset being used as collateral. Auto loans are an example of secured debt—if the loan isn’t paid, the lender can repossess the vehicle.
• Unsecured Debt. This is debt that isn’t backed by collateral. This includes things like unsecured credit cards and lines of credit. Here, one of the biggest factors in determining how much you can borrow is your credit rating and credit score—lenders use this number to determine how “trustworthy” you are as a borrower. Having a higher credit score means being able to borrow more (often with better interest rates).
• Mortgage Debt. This is a specific subset of secured debt where the property being mortgaged is used as collateral. There are many different types of mortgages (e.g., open, closed, conventional, etc.). Mortgage debt typically takes years, even decades, to pay off in full.

Currently, mortgage debt is the main driver behind the increase in total household debt. (There was a 41% increase in new mortgage borrowing at the beginning of 2021.) Conversely, non-mortgage consumer debt seemed to decrease during the COVID-19 pandemic. This is partly due to emergency income supports provided by the government, which helped Canadians pay down their credit card bills. Plus, spending decreased due to lockdowns. 

How Has Household Debt Changed Over the Years?

Household debt has changed in several ways over the years. For example, in recent years, the ratio of debt-to-household income has skyrocketed in Canada. In Q1 1990, the average debt-to-income ratio was approximately 88.77%—in Q2 of 2021, it was 173.08%.

In other words, Canadian households are holding much more debt compared to their income than they were just a few decades ago.

Meanwhile, the ratio of debt from credit cards has dropped—reaching a six-year low. As mentioned earlier, this could be explained by a drop in consumer spending during the COVID-19 pandemic as people spent more time at home (reducing the amount of money they’d normally spend on shopping trips, vehicle maintenance, and eating out at restaurants).

These are just a couple of the changes we’ve seen in recent years. There are likely to be more changes in household debt statistics in the coming years as the economy recovers from the pandemic and new businesses emerge to service a remote workforce.

What You Can Do About Your Debt

So, what can you do about your debt if you find yourself struggling to keep up with bill payments, or bombarded with constant collection calls?

One of the first steps you can take is to use a debt calculator tool to get an idea of just how long it will take you to pay off your debt, plus how much you’ll pay in interest.

This can give you an idea of whether your debt is something that you can manage on your own by simply setting aside a little extra money each month, or if you need some additional help.

If you do need help getting out (and staying out) of debt, as most of us will at some point or another, call us! Our team of experienced Credit Counsellors has helped thousands of consumers find their path to being debt-free with a combination of debt relief services and money management advice. You can solve your debts with Credit Canada!

Whether you’re considering getting a debt consolidation loan in Ontario or just need some money-saving tips, we can help you find the right solution that will get you out of debt and back into life. 

Reach out to us online or call 1.800.267.2272 to get started!