38% of insolvent millennials use payday loans

It’s no secret Canadians are cash-strapped, with previous research suggesting many aren’t contributing enough to RRSPs and TFSAs. But, for those who face the extreme of insolvency, daily expenses can be insurmountable, let alone contributing to savings plans. The average insolvent Ontarian uses most of his income to pay for necessities such as housing and […]

By Staff | March 27, 2017 | Last updated on March 27, 2017

2 min read

It’s no secret Canadians are cash-strapped, with previous research suggesting many aren’t contributing enough to RRSPs and TFSAs.

But, for those who face the extreme of insolvency, daily expenses can be insurmountable, let alone contributing to savings plans.

The average insolvent Ontarian uses most of his income to pay for necessities such as housing and regular living expenses, reveals new research from insolvency firm Hoyes, Michalos & Associates. Further, debt is used to fill any gap in daily expenses, resulting in a vicious cycle.

Millennials (aged 18 to 29) make up 14% of Ontario insolvencies, up from 12% in 2015, finds the report. As expected, one third (31%) of insolvent millennials have student debt. But, more concerning, 38% have payday loans. That compares to 25% for insolvent people overall.

And less than 1% of millennials have cash on hand, indicating they’re living paycheque to paycheque.

Another potential problem: millennials tend to be more loyal to their banks than other generations, reveals a survey by LowestRates.ca. For instance, they trust their banks to provide them with the best credit cards, thus they don’t shop around for the best rates and features.

Read: Many Canadians withdrawing RRSP funds for daily expenses

Other details on insolvency from the Hoyes Michalos report:

Seniors aged 60 and older are the fastest-growing risk group for insolvency, making up 12% of all insolvent debtors.
Insolvent seniors have the highest credit card debt, and only 44% have RRSPs.
Single-parent households are twice as likely to become insolvent than two-parent households, and 33% of insolvent single parents use payday loans.

Ipsos conducted the survey for Lowest Rates, polling 1,001 Canadians February 14-15. Hoyes, Michalos & Associates reviewed the details of more than 6,700 personal insolvencies in Ontario from January 1, 2015, to December 31, 2016, and compared the results with previous insolvency reports.

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