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Indebted Canadians say they need 40% more income to live debt-free: MNP/Ipsos poll

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WATCH: Here’s a breakdown by province of Canadians in debt who say they need a higher income to stop borrowing.

A majority of Canadians who owe money on their credit cards, lines of credit and other consumer debt products believe they would need a significant income boost to be able to kick their borrowing habit.

READ MORE: 7 common mistakes that explain why you never have enough money

The results come from a recent countrywide survey conducted by Ipsos on behalf of MNP, one of Canada’s largest debt consultancies. According to the poll, 60 per cent of Canadians who carry non-mortgage debt say they would need to be making a lot more money in order to cover their expenses without relying on loans. On average, these borrowers think they need to be making nearly 40 per cent more.

“It used to be that people would save for big purchases and have some money tucked away for emergencies. Now Canadians look straight to [home equity lines of credit] HELOCs or credit cards or other forms of debt when it comes to paying for unexpected car repairs, home maintenance, and even basic household expenses,” Grant Bazian, president of MNP said in a statement.
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The data made available by MNP suggests little correlation between income levels and indebted Canadians’ belief that they need more money in order to live debt-free.

For example, survey takers in Alberta, the wealthiest province in Canada, were most likely (69 per cent) to say they would need a sizable top-up (above 20 per cent) to their household income in order to get by without debt. Albertans had a median household income of almost $94,000 in 2015, which was 25 per cent higher than the national median, according to numbers from the 2016 census.

After Alberta, Canadians living in Atlantic Canada (62 per cent) were the most likely to say more money would solve their debt problems, followed by Saskatchewan and Manitoba (59 per cent), Ontario (55 per cent), Quebec (51 per cent), and British Columbia (50 per cent).

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READ MORE: Are you earning a middle-class income? Here’s what it takes in Canada, based on where you live

Still, the lower the income level, the larger the financial boost Canadians said they would need in order to cover expenses without dipping in the red.

Among Canadians who said they’d need to make over 20 per cent more to scrap their debt, those with incomes below $40,000 a year said they’d need to make nearly 50 per cent more in order to kick the borrowing habit. Those making more than $40,000 but less than $100,000 said they’d need around 30 per cent more on average, while Canadians with six-figure incomes called for 25 per cent more on average.

WATCH: Here’s how to get out of credit card debt

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Here’s how to get out of credit card debt

Canadians who aren’t keeping up with their bills also said they’d need to be making almost 50 per cent more to live without debt.

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These debtors and those in low-income households are particularly vulnerable to rising interest rates, according to Bazian.

“When debt becomes a financial survival tool, it makes people particularly vulnerable to exploitative and high-cost lending. They have to spend more to service their debts — particularly as interest rates rise — so they have less money to make ends meet,” he said.

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It doesn’t help that some Canadians mistakenly think that being approved for a loan means that they must be in a good enough financial position to repay it.

“Lenders are telling you how much you can likely borrow, not necessarily how much you can comfortably afford,” Bazian said.

READ MORE: Need cash in a hurry? Here are the best and worst ways to get it

Ipsos conducted the poll between March 12 and March 16, 2018. For this survey, a sample of 2,001 Canadians from the Ipsos I-Say panel was interviewed online. The precision of online polls is measured using a credibility interval. In this case, the results are accurate to within +/- 2.5 percentage points, 19 times out of 20, of what the results would have been had all Canadian adults been polled. Credibility intervals are wider among subsets of the population.

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