Growth In Access To Subprime Credit Cards

During the end of this year’s first quarter the credit card balance of consumers in Canada went up by 3.5 per cent from the first quarter in 2015, up to a balance of 20.4 million. Subprime mortgagors have specifically signed up for a large number of credit cards in the recent two years, with 14 per cent who have provided access to a credit card amongst the first quarter of 2015 and this year.

The subprime borrowers “serious delinquency rates” (which was defined by TransUnion as accounts that are outstanding by two months or more) went down in that same course of time by 9.4 per cent. Based on the credit information company, 2.5 million Canadian borrowers thought that subprime will now have the right to use credit cards.

Elena Jara of Credit Canada Debt Solutions said; “We have been seeing that a lot of subprime borrowers have been acquiring credit, and the reason we see that is mainly because it’s become a lot easier to get credit lately. I think the lenders have eased up on the availability of credit to the high-risk consumers because they feel that the economy is doing well.”

The four groups of the $21,696 median non-mortgage debt were broken down in the first quarter of this year. Auto loans up by 2.67 per cent yearly to $20,141, Lines of credit, $29,793, down by 1.81 per cent annually, Credit cards increased by 2.23 per cent yearly to $3,904 and installment loans annually up by 5.46 per cent to $24,795.

Credit Counselling Society’s Scott Hannah mentioned; “I find it concerning when I see that the largest growth was in auto installment loans. Many of those installment loans have incentives for people to take out a loan [and make] a very low payment over an extended period of time, upwards of seven years. Those same individuals will find themselves underwater after about a year, when the depreciation on the value of that vehicle has declined faster than the amount of the loan.”