Canadian household debt is among the highest in the world relative to disposable income (~180% as of 2024). Credit card APRs average 19-30%. The Bank of Canada and CMHC monitor over-indebtedness using two ratios:
- GDS (Gross Debt Service): housing costs ÷ gross income
- TDS (Total Debt Service): housing + all debt payments ÷ gross income
CMHC thresholds
| Zone | TDS | GDS | Diagnosis |
|---|---|---|---|
| 🟢 Healthy | <40% | <32% | OK |
| 🟡 Caution | 40-44% | 32-39% | Stress |
| 🔴 Over-indebted | 44%+ | 39%+ | Urgent action |
These are exactly the thresholds used by Canadian mortgage lenders for qualification.
The 3 strategies
1. 0% balance transfer card
Canadian banks offer 6-12 months at low intro rates.
2. Personal loan or LOC consolidation
Bank lines of credit at prime + 1-3% (currently ~7-9% APR), personal loans at 8-15% APR.
3. Avalanche vs Snowball
Standard methodology.
When to consider Consumer Proposal or bankruptcy
Consumer Proposal
Legal alternative to bankruptcy. Negotiate to pay portion of debt over up to 5 years. Requires Licensed Insolvency Trustee. Stays 3 years on credit file post-completion.
Bankruptcy
Discharges most debts. 9-21 months for first-time. Stays 6-7 years on credit file.
NOT shameful. Legal tools when situations are unsustainable.
Free help resources
- Credit Counselling Canada (creditcounsellingcanada.ca)
- OSB (osb-bsf.ic.gc.ca): Office of Superintendent of Bankruptcy
- FCAC: free guidance
- Equifax Canada / TransUnion Canada: credit reports
Based on CMHC + Bank of Canada household debt data 2024.
Measure your level now
Apply what you just read and discover your real score in under 2 minutes.
About the author
Enrique 'Kike' Faúndez is an Information Systems and Management Control Engineer from Universidad de Chile, with master’s degrees in Finance from Universidad de Chile and Industrial Engineering from Pontificia Universidad Católica de Chile. He has 15+ years of experience in regulated financial services across finance, operations, and digital product development. He founded CashControlly in Santiago, Chile, with the conviction that personal financial control should not be a privilege, but an accessible and well-designed tool.
- Master's in Finance, Universidad de Chile
- Master's in Industrial Engineering, Pontificia Universidad Católica de Chile
- Information Systems and Management Control Engineer, Universidad de Chile
- AI and ITIL certifications
- 15+ years in regulated financial services
Want to actually apply this?
CashControlly helps you turn this into daily habits. No bank connection required.
Start 7-day free trial