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What is PERSONAL DEBT? The consumerís credit that is outstanding is called as Personal Debt. The modern day perception is that personal debt in a way increases domestic production based on the fact that if credit is easily available the demand for consumer goods would increase and thus increase the overall domestic production.

The most common forms of personal debt are payday loans, credit card debts, consumer finances that are obtained at a higher rate of interest than secured loans. The interest rates in turn depended on factors such as the economic climate, ability of the lender to repay the loan and the inherent security of the credit product. Canadians first got introduced to credit cards in the year 1968. This made them spend the money faster and easier that they didnít possess necessarily.

Personal debt quite often is also associated with predatory lending. Predatory lending describes unfair, fraudulent or deceptive practices of certain lenders during the loan transaction process. Of late personal debt has been on the rise in countries like USA, Canada and UK.

As the interest rates dipped to the lowest level in years in the recent times in Canada, the consumers responded by purchasing everything from cars to cottages to appliances etcÖThis led to a healthy economic life cycle that also created many jobs. But consumers had to one day pay for the good times they had!

A recent survey conducted in 2009 concluded that 42% of the respondents had agreed that their personal debt has been on the rise in the past two years. Of these 25% frankly agreed that they couldnít manage their debt. 58% of the respondents attributed their day to day life the main cause for their increasing debt. The same survey in 2007 concluded that 46% of the respondents attributed day to day life expenditures as their principal cause for rising debt.

According to Bank of Canada, presently Canadian consumers owe a collective debt of $750 billion! Thatís up by a huge margin of 36%. The debt surge has mainly been attributed to very low mortgage rates. However there exist more typical forms of borrowing like credit cards. Due to the addiction that Canadians have had to lower interest rates the now tend to be more vulnerable to economic shocks like recession, sudden rise in interest rates job loss etc.

This vulnerability can be best explained by the steady decline in the savings rate of the Canadians. The savings rate that stood at 14.8% in 1985 has now steadily come down to a mere 1.6%. Economists suggest that itís not the debt size but the debt affordability that is the issue. The interest rates were down to an all time low of 7% for an average Canadian consumer a couple of years back. Economists suggest that Canadians can afford their current debts provided the interest rates rise gradually. To support this history states that Canadians usually save a large amount of their income during economic slowdowns. The household savings rate rose from 2.7% in 2007 to 4.8% in late 2008 suggesting a healthy trend. What is PERSONAL DEBT?

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