More Canadians are finding it hard to resist the temptation of borrowing money, as the use of home equity lines of credit increases, consumer groups have warned.
Statistics Canada found many are now turning their backs against credit cards and have started choosing home equity lines as their top source of borrowing. The figures showed outstanding balances on lines of credit soared to $266bn in March 2015, from $100bn in 2005 and just $35bn in 2000.
Moreover, personal loans are now accounting for 59 per cent of Canadians’ non-mortgage personal debt, from just 30 per cent in 2000.
“When you’re going through the grocery line at the store, do you buy that magazine by the cash? It’s there, it’s an impulse buy. The line of credit thing is the same thing – it’s there,” bankruptcy trustee Doug Hoyes was quoted as saying by BNN.
“The easier it is to get credit, the more you get. And that drives up insolvency rates.”
Laurie Campbell, chief executive of Credit Canada Debt Solutions Inc., shares the sentiment, saying home equity lines of credit allow many people to borrow far more money than they used to be able to with credit cards or other loan options.
BNN also reported that the Canadian Association of Accredited Mortgage Professionals showed 27 per cent of Canadians in 2014 also had home equity credit lines, and 90 per cent of the lines had an outstanding balance.
The report added that nine per cent had used their entire borrowing limit.
“Financial innovation and increases in house prices have probably been significant factors underlying the increase in total consumer credit,” the report said.
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