Alternative Lending: Closing the Debt-to-Income Gap

We’ve talked a fair bit about the importance of debt-to-income ratios here at the Progressa blog. This fundamental ratio shows the relationship between how much you make, and how much you owe: for Canadians, it has leapt to historically high levels in recent years of over 160%. This means that for every dollar they make, Canadians owe almost two dollars – some of the highest debt accumulation in the developed world.

We know that a great many consumers are working hard to reduce their debts, taking all kinds of different lifestyle changes into account to try to get their debts under control and be able to save smarter and live more sustainably without financial pressures. This is why Progressa was created: to offer lending solutions that actually improve our customers’ ability to lessen their debt load and improve credit over time. Efforts like these are incredibly important when it comes to the reduction of debt-to-income ratios! However, less focus has been trained on the income side of the equation.

According to research by the Canadian Centre for Policy Alternatives, growth in both part-time and full-time income has slowed significantly with major lag periods in 2008 and 2012. This creates a strange economic situation in which many consumers are taking on debt to make up for stagnant or declining purchasing power, but it’s not enough to revitalize economic health on a large scale.

The gap between wages and the lifestyle many Canadians desire is growing. It is more important than ever to focus on the importance of living within our means and doing what we can to reduce our reliance on short term debt. Your efforts to stay smart about spending, saving and careful budgeting are never going to lose their value. Alternative approaches such as “side hustles” and other forms of secondary income generation are proving to be more than just passing fads, instead becoming test beds for innovative approaches to reducing the debt/income disparity. Alternative lending, too, has grown from an experimental model to one that can close the gap.

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