Canadians can’t keep up with their debt: Benchmark Canada - National Post

Copy URL Facebook Linked In X (Twitter) Loading account options Sign In Manage Account Close account menu Sign Out The numbers suggest borrowers with larger debts are having more difficulty keeping up their payments, and face increased pressure with higher minimum payments. (Adobe Stock) By David George-Cosh, Special to National Post November 4, 2026 at 7:00 a.m. Countries don’t typically get report cards, but there are hard facts that can be collated, assessed and compared. Enter Benchmark Canada, a new project from the Macdonald-Laurier Institute that brings together more than 40 different metrics that measure this nation’s performance. This fall, the National Post is examining many of those findings.

Canadians are falling further behind on car loans, credit cards and personal loans, with arrears in all three categories hitting their highest levels in the decade-long period tracked by Benchmark Canada.

Canada’s debt strain is greatest in instalment loans, which include unsecured personal loans and point-of-sale financing. The share of those loans that are at least 90 days overdue reached 2.95 per cent, more than triple the 0.95 per cent recorded in late 2015, the Macdonald-Laurier Institute project showed.

Meanwhile, auto-loan arrears stood at 0.87 per cent, up from a pandemic low of 0.39 per cent in 2021. Credit-card arrears reached 0.80 per cent, nearly double from their 2021 low of 0.44 per cent.

Doug Hoyes, co-founder of insolvency firm Hoyes, Michalos & Associates Inc., said borrowers often tap a line of credit to make up for lost income. When that runs out, they turn to credit cards, then higher-cost instalment loans and payday lenders.

“You cannot keep layering borrowing on top of borrowing,” he said.

Hoyes said many of his clients use those loans to cover bills after exhausting cheaper sources of credit, hoping their income will recover before the payments become unmanageable.

His firm’s clients carried average unsecured debts of more than $67,000 last year, up 11 per cent from a year earlier and 37 per cent over three years, and owed money to an average of 10 creditors.

Matt Fabian, TransUnion Canada’s senior director of financial services research and consulting, said that while Canadians are having trouble paying back their loans, they’re still relatively managing their debtload. Payment deferrals, government support and reduced spending during the pandemic helped pushed overall arrears to unusually low levels from the recession of 2008-2009 before bouncing higher in the past year, he noted.

“For some products, in some segments, it’s higher than it was pre-COVID. For some, it’s just returning,” he said.

Instalment loans performed worse partly because of the type of borrower who takes them out, Fabian said. Borrowers seeking debt-consolidation loans likely already have financial problems, while alternative lenders serve higher-risk customers who may not qualify for traditional bank loans.

Those borrowers pay higher interest rates and have less room to absorb increases in living costs or a loss of income. Fabian described subprime consumers as “constantly living in their own personal recession.”

TransUnion’s latest quarterly credit report found average non-mortgage debt in Canada reached $28,118 per customer in the second quarter, up 7.6 per cent from a year earlier. Total consumer debt, including mortgages, hit a whopping $2.64 trillion.

The TransUnion data showed the share of borrowers who were at least 30 days overdue on their payments fell to 4.27 per cent from 4.34 per cent a year earlier. But the share of those at least 90 days overdue rose to 1.81 per cent from 1.77 per cent. Benchmark Canada’s figures, drawn from Bank of Canada calculations using TransUnion data, measure the share of loans at least 90 days overdue.

The share of debt balances falling into arrears is also rising faster than the share of income coming into one’s accounts, Fabian said. That suggests borrowers with larger debts are having more difficulty keeping up their payments, and face increased pressure with higher minimum payments, he said.

A C.D. Howe Institute report published this month found that national debt figures are masking growing strain among younger and lower-income Canadians.

The share of household disposable income used to pay debt fell to 14.5 per cent in the second quarter, from a 2023 peak of 15.2 per cent, the C.D. Howe analysis found. But younger Canadians carry unsecured debts without the cushion of home equity older Canadians can enjoy thanks to Canada’s frothy real estate market.

More borrowers are also seeking formal debt relief. Consumer debt proposals accounted for nearly 80 per cent of insolvency filings in the second quarter, up from about 60 per cent before the pandemic, TransUnion reported. Banks often have established programs to help restructure payments and have an incentive to preserve relationships with customers who hold chequing and savings accounts with them, Fabian said.

Saul Schwartz, professor at the School of Public Policy and Administration at Carleton University, cautioned against reading the rise in consumer proposals as a sign of worsening borrower behaviour. Instead, Canada’s banking system is inducing more borrowers to pay more of what they owe, he said.

Proposals can help borrowers protect assets and spread payments over time, but most pay more than they would in bankruptcy, Schwartz said. Governments can help, he noted. “Establishing publicly funded debt advice services, either nationally, provincially or even municipally, would be a big step forward.”

He also pointed to the Breathing Space program in England and Wales (Scotland runs its own separate debt program), which freezes most interest and charges on qualifying debts for up to 60 days while borrowers seek advice on how to make their repayments.

Hoyes said he expects rising arrears to lead to more insolvencies as borrowers exhaust their remaining credit.

“Nobody files bankruptcy at the first missed payment,” he said. “They file when they’ve run out of ways to keep going.”

Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.

You must be logged in to join the discussion.