Canadians say debt repayment was a top priority in 2013 but a CIBC poll shows nearly half have not reduced their debt from a year ago, with 21% reporting they owe even more now.
The slow economic recovery may be to blame. Many say the number one reason they couldn’t pay off debt was because they didn’t have the money.
Poor financial planning is also a problem. Only 6% of Canadians say debt is a conversation they would have with their advisors, reports CIBC study. This suggests debt reduction is a subject you should bring up with clients.
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Consumers might lack emergency funds, too — 12% of Canadians say they couldn’t pay down debt because of unexpected expenses.
Overall, 71% of those carry debt, a meagre 1% drop from last year’s poll.
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While Atlantic Canada has the most residents with debt (79% compared to the lowest in B.C., 64%), only 8% say their debt grew. Meanwhile, almost a quarter of people in other provinces increased debt.
Here are some tips so your clients can reduce debt:
- Make lump sum payments to higher interest debt first to reduce interest costs;
- Minimize overall interest costs by using debt products that offer a lower interest rate, and have a strategy to pay these balances down in a specific time frame; and
- While interest rates remain near historic lows, don’t ignore the long term benefits of making small adjustments to your payment today. Setting your debt payment even slightly higher than your required payment helps.