As Canadian youth face a difficult job market and low wages, those taking on debt for the first time are finding it difficult to pay it down and new data shows some are already missing payments.
A new report from Equifax Canada shows there’s been a significant increase in delinquencies among Canadians under 26, with those 18 to 25 seeing a 15.1 per cent increase compared to an 8.9 per cent rise among non-mortgage holders overall.
This includes a 21.7 per cent rise from this time last year in 90-day or more delinquencies of credit cards among those under 26.
The overall population with this type of delinquency rose 15.8 per cent.
A big factor, Equifax says, comes from wages entering the job market not matching the amount they may need to pay off debt.
“Being able to balance the cost of living with debt levels is more difficult and more challenging, which is why through the numbers we are seeing that stress come through,” said Kathy Catsiliras, vice-president of analytical consulting for Equifax Canada.
“They are finding it more challenging to stay current on their debt obligation, married with the fact we’re seeing unemployment rates increase.”
The report also showed delinquency rates for younger drivers rose by 30 per cent on auto loans, compared to the overall rate which saw an increase of 15.3 per cent.
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Catsiliras added with unemployment rates rising — Canada’s rose to 6.9 per cent in April, according to Statistics Canada — some youth are without an income to pay off debt, but also have to resort to their credit card or loans to afford things like food and rent.
Some of that difficulty comes from a job market that is stagnating amid the ongoing trade war with the U.S.
As a result of President Donald Trump’s tariff policies, some companies have had to dial back plans for hiring new workers and others have had to lay off employees.
The increase in the cost of essentials, shelter and a competitive job market are all factors that put added pressure on Canadian youth trying to pay for basic needs, said Shannon Terrell, a personal finance expert with NerdWallet.
“All of these factors combined can definitely make for a challenging financial situation in which your credit card is being used to bridge the gap, especially if you’re someone who’s living paycheque to paycheque,” she said.
Some of the delinquencies, however, may also be a result of more youth entering the credit market and taking on a new credit card or loan, but due to them having debt for the first time, they may make a misstep.
“They’re getting used to the fact if they charge a lot, those payments go up and they’re going to owe a balance,” said Matt Fabian, TransUnion Canada’s director of financial services research and consulting.
“Some of them, they’re able to adapt and do just fine. Some of them, it’s a bit of trial by fire, so we do see sometimes heightened delinquency.”
Fabian said they do see a high “cure” rate, however, with youth who may have a “trip and fall” eventually understanding how debt works and not missing payments.
A TransUnion Canada report released Wednesday showed youth are among two groups driving up the total debt by Canadians, with the group seeing their outstanding balances grow by 30.6 per cent compared to the previous year.
Fabian explained outstanding balances is taking a look at the overall outstanding debt Canadians owe, though the report showed youth also make up 10.3 per cent of new accounts opened.
With more youth entering the debt world by opening new credit or taking on loans, financial experts say there are still things that can be done to avoid missing payments.
“It’s often this challenging balancing act,” Terrell said. “They’re (youth) trying to build their financial foundations while they’re facing, in reality, some of the steepest affordability challenges Canadians have faced in recent memory.”
Terrell said if facing difficulty with debt, it can be worth having a debt repayment strategy, looking into a balance transfer credit card, debt consolidation loan or working with a financial advisor to determine the best options.
Budgeting can also come into play, Catsiliras said, including making sure you can afford more than the minimum payment to avoid interest building that could make paying down debt more difficult.
“Make sure from an affordability perspective before engaging into some form of new credit that you understand the obligation, you understand sort of payment requirements, and you’re able to hold true to your commitments so that you don’t fall into the groups we’re seeing a lot of people fall into, which is a lot of delinquency,” she said.
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