Almost two thirds of Canadian adults have taken out a personal loan
29 April 2019
Personal loans statistics
At some stage, we all need or want more money than we have. So what do we do? The answer might be putting it on the credit card, asking mom and dad or working hard for a pay rise. However, for many Canadians, the answer is taking out a personal loan.
From the frivolous big ticket items, such as weddings and holidays, to more practical expenses, like higher education and mortgages, Finder surveyed 1,200 Canadian adults to find that 65.33%, or 19.52 million, Canadians have taken out a personal loan.
Top reasons people take out a loan
Funding a new set of wheels is the number one reason Canadians take out a personal loan. According to the survey, 41.25% of those surveyed had taken out a personal loan to buy a car, more than double the amount of the second common reason – financing a mortgage (19.5%).
A number of Canadians (15.75%) also use personal loans to consolidate their debt by melding them together and, hopefully, cashing in on a lower interest rate. In a similar vein, Canadians are also taking out personal loans to pay off their credit cards (13.92%).
A decent portion of people are using personal loans to fund a renovation (13.17%), possibly thinking they can add some value to their home with a new kitchen or bathroom. Canadians are also using loans to pay for their higher education (10.92%), which could help them earn a higher salary down the track. This 2017 StatCan census report found that both men and women with a bachelor’s degree earned more than those with a college, high school or trades education.
Wondering how your neighbours could afford to go to Cabo for three weeks? They might have taken out a personal loan to fund their travel. Although, only 7.5% of survey respondents said they took out a personal loan for this reason.
Other reasons for taking out a personal loan include paying for a wedding (2.67%), covering medical expenses (2.75%) or paying for a funeral (1.75%).
Men more likely to take out a personal loan
Perhaps unsurprisingly, men are more likely than women to take out a personal loan. According to our survey, 69.05% of men said they’ve taken out a loan compared to 62.09% of women.
The biggest difference between genders? Men are significantly more likely to use a personal loan to buy a car. Just under half of men (46.51%) admitted to using a personal loan to buy a car, while just over a third of women said the same (36.66%). Men are also more likely to take out a personal loan to fund a holiday and renovation.
While it might be the stereotype that a wedding is “her” day, men were actually ever-so-slightly more likely to take out a personal loan to fund the celebration, with 2.68% of men willing to do so compared to 2.65% of women.
In turns out women are more likely to take out a loan for practical reasons, such as paying for higher education or to consolidate debt. They’re also slightly more willing to take out a loan to pay for medical expenses.
Baby boomers most likely to have taken out a personal loan
While baby boomers might like to think they’re the most financially savvy generation, they’re actually the most likely to have taken out a personal loan, with 72% of people aged 55-64 admitting to doing so.
On the other end of the spectrum, generation Z Canadians (adults aged 18-24) are the least likely to have taken out a personal loan. Just over half of people in this age group admit to using a personal loan – possibly because they’re still clinging to the bank of mom and dad or because they’ve simply had less time to need a personal loan compared to their older counterparts.
Baby boomers are significantly more likely to buy a car with a personal loan compared to people aged 18-24. Roughly half of people aged 55-64 (50.37%) said they’ve used a personal loan to pay for their car, compared to just 8.51% of generation Z – a difference of 41.86%.
However, generation Z adults are far more likely to use personal loans to pay for the fun stuff, like a wedding or a holiday. According to our survey, 10.64% of generation Z used a personal loan to fund the wedding of their dreams, compared to just 1.12% of baby boomers. Likewise, 12.77% of generation Z admitted to taking out a personal loan to fund their wanderlust adventures overseas – the highest of any generation.
In which regions are people most likely to take out personal loans?
Those in the Prairie Provinces are taking out the most loans, at a whopping 71.05% – well above the national average of 66.75%. West Coasters followed suit at 67.52%, followed by the Atlantic Region (65%). Central Canadians are least likely to take out a personal loan, at 63.44%.
Decided you need a personal loan? Here are some tips on getting approved.
Tips to get approved for a personal loan:
Make sure you meet the criteria. To qualify for a personal loan in Canada, there are five main factors lenders consider. These include your income, employment, credit history and loan security as well as your assets, which include your debts and expenses. These factors not only influence your chances of approval, but could also affect the rate of interest on the loan.
Build a solid credit history. A great credit history is the best way to secure a low interest loan because lenders use this to determine whether you’re a trustworthy applicant. If your credit history isn’t up to scratch, you might consider taking out a credit builder loan to help repair the damage.
Lower your debt to income ratio. Generally, lenders want to see a debt-to-income ratio of less than 40%. This is the percentage of monthly income that goes towards paying off your debt. You can lower yours by bringing in more money each month and paying down your existing debt.
Tips for paying off your personal loan faster:
Make extra payments. By exceeding your typical monthly payment, you can chip away at your loan while saving on interest. Make biweekly repayments. Paying off your loan in half-repayments every two week can feel like you’re paying the same amount each month while shaving off at least a couple of weeks.
Refinance or consolidate. When better rates are offered, it’s wise to jump on them because you’ll ultimately end up saving money. And, if you consolidate multiple loans, you’ll save yourself the headache of having two or three different payments a month.
Get a balance transfer credit card. Sometimes credit card providers will offer interest-free and low balance transfer rates. This is a smart decision if you have a small amount to pay off on your loan. You’ll pay no interest if you can lock in a card with a 0% balance transfer rate, but, be careful to pay attention to the time frame of the promotion.
Save your change. You’d be surprised how fast your nickels and dimes add up. Look for an app that will round up change from purchases made with a card and use your savings for an extra payment.
Take advantage of discounts. Some lenders offer you a slight discount for either going paperless or enrolling in autopay, don’t sleep on these savings.
This data is from a survey of 1,200 Canadian adults commissioned by finder.com and conducted by OnePoll in April 2019. Due to not having enough respondents, the North region (Nunavut, Northwest Territories, Yukon Territory) was not included.
Madeleine Gracie is a Communications and Campaign Specialist at Finder. She completed her Bachelor of Arts (Media and Communications) at the University of Sydney. You can contact her at email@example.com.
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