Canadians say they are eager to be debt-free, but are missing many opportunities to pay down debt faster, says Manulife Bank.
A recent survey by the bank found 61% of Canadians have struggled to reduce their debt over the past year. Worse still, 25% said they have increased their debt, while 15 have seen no change. Only 21% said they’ve reduced their debt—but by less than they expected.
The top three barriers to debt reduction were identified as a lack of extra money (54%), the overall amount of their debts (43%) and the interest rates they pay on their debts (39%)—despite interest rates remaining at near historic low levels. Another 27% said they had too many different debts.
The survey also found that many Canadians are not taking advantage of strategies that can help them overcome these barriers and reduce their debt faster. For example:
- almost half (43%) said they do not plan to consolidate their debts at a single low interest rate;
- among respondents with a mortgage, 70% said they did not make any extra payments on their mortgage in the past year;
- two-thirds of homeowners (65%) said they did not compare mortgage products from more than one lender the last time their mortgage came due;
- more than half of respondents (55%) said they do not plan to work with a professional financial advisor to get advice on how they can manage their debt; and
- only 56% of respondents said they have, or intend to create, a debt repayment plan that includes a specific date for when they expect to be debt-free.
It should be noted that Manulife Bank offers the Manulife One account, a debt consolidation product which, if used with discipline, can reduce debt more quickly.
Full results of the survey are available at manulifebank.ca/debtresearch.
For more on an advisor’s role in managing client debt, read Stephanie Holmes-Winton.