Realities of Debt

By Tua | April 17, 2017

In many ways, the Canadian financial system is built on debt. Sure, a loan can be a good thing; especially when it helps everyday, hard-working people achieve their goals. But debt has another side that can get out of control, quickly. Let’s explore some of the great things happening in the world of credit, and hazards to be mindful of.

The Weight of Student Debt

Some graduates out there are saddled with a lot of debt. An informal study found millennials would go to great lengths to get rid of it, including:

  • Turning their lives into a reality show (55%)
  • Getting rid of half their possessions (43%)
  • Being guinea pigs for some weird drug study (38%)
  • Even selling one of their organs (30%)

Extreme—but it goes to show how debt dominates young minds. It’s believed it keeps 56% of them from moving on with their lives after school. It keeps 29% of them from buying a car, 19% from getting married and 30% are hesitant about owning a home. And yet, many don’t realize they can be eligible for some debt forgiveness. Still others can get debt consolidation loans (like from Tua) to ease the pain.

0% Financing (The Truth)

“0% interest and zero payments for an entire year!” Sounds great, right? Get something now and don’t pay for it? But read the downside in the fine print—there’s consequence to convenience. For example, when the year is up, miss one payment, and purchasers could get slapped with an interest charge for the entire year; as high as 24-29%. (They may even have to pay interest on the accrued interest!) Anyone who agrees to one of these financing methods should pay off the full amount on the 11th month, and extra charges won’t be incurred. Everyone should avoid these offers unless they can afford the monthly payments or know they can pay off the full balance before the year’s up.

The Rise of Fintech

The loan business needs re-invention. And hi-tech companies are stepping up, with sophisticated computers that calculate loan risk a whole new way. Peer-to-peer lending platforms connect qualified customers to private lenders. Entirely new techniques are being used to evaluate young customers, because a third of millennials don’t use credit cards and are spooked by debt. With no credit past it’s hard to determine excellent candidates. But lenders like Tua are changing the game. Rather than just using old methods, we also consider things like post secondary, post-graduation employment, cash flow, and income level. These factors determine the likelihood of payback. It’s complex, but now people have access to loans (and opportunity) like never before. And that means they have the means to fuel their dreams.

Emerging trends in debt can be positive, but also have their share of pitfalls. In certain aspects, technology and social trends are creating opportunity for people formerly underbanked. But as with all personal finance decisions, everyone must ensure they are managing their money well and within their means.