“How much debt is too much in Canada?”- This has become a common question among people who are thinking to take a loan or already carrying debt.

There are particular ways to decide how much debt is too much in Canada. And this depends on individuals. In a simple way, I can say- if your earning is very less and if your debt amount is excessive then your debt is too much.

There are many factors that decide whether the debt is excessive or not. So in this blog, I’m going to share what are the important factors that you should consider while analyzing how much debt is too much.

How Much Debt is Too much in Canada?

How Much Debt is Too  Much in Canada? – 19 Warning Signs

If you are carrying debt for a long time then and struggling to pay off your debt then consider these 19 warning signs. You must know how much debt is too much for you as a Canadian.

If you are planning to take any loan then also you must follow consider these 19 warning signs before taking loans.

1. Know How Much VEHICLE LOAN is Too Much in Canada

I’ve seen many people carrying car loans or bike loans. Most people like to have their own vehicle even if they can’t afford. This ends up in applying for vehicle loans.

You should remember that if you can’t pay at least 20%-25% down payment then you can’t afford this debt. And if you can afford then your monthly repayment should not be more than 10% of your income. Also, you should be able to pay off the full amount in less than 5 years.

2. Know How Much Debt is Too Much for Students in Canada

Planning a career is very important in student life. And you must know in the beginning only about your future opportunities and your career before applying for a loan for your education. So you should have a strategy to deal with student loans.

One can’t predict salaries and earning in the future days, but right now you should calculate it roughly so that you should repay your debt in the future days. You should pay off your loan with your first year’s salary. If you are not able to pay off with your first year’s salary this student loan is too much debt for you.

3. If your DTI Ratio is crossing 35%, You are Carrying Too Much Debt

Debt-to-income ratio (DTI) calculation is very important and necessary. This is a simple calculation of your debt ratio. The formula to calculate DTI is recurring monthly debt divided by gross monthly income. If this results in more than 35% of then your debt is too much.

So always make sure that you maintain the ratio very carefully. Your DTI ratio should not cross 35 percent. That means either you should reduce your debt or you should try to increase your income to maintain this ratio.


If you have a plan of buying a house then it is always good to check that cost should not be more than 2.5 times your annual income. And here also you should be able to pay a 20% down payment.

Make sure your monthly payment should not exceed 28% of your monthly income from all the sources. If it is more than 28% that means your debt is too much.

5. Too much CREDIT CARD Debt is not good for your financial health

If you ask me how much credit card debt is too much then I would say having more than or credit card is too much. I feel that one credit card is enough.

And if you can not pay off the whole credit card debt within 12 months then you are having too much debt. Well, you do not need to make any purchases just because you are having a credit card. Think twice before swiping your card.

6. PAYDAY LOAN is Too Much Debt for Canadians

A payday loan is a small amount of loan that is actually less than your monthly salary. And you promise to pay off this loan immediately after receiving your next salary. If you are opting for payday loans, this is the sign of too much debt.

You are having a lot of debts and you are not able to save money even for essentials till the next salary day. I feel this is actually too much loan because you may require a payday loan every month to handle your monthly expenses. There are many disadvantages to a payday loan.

7. You are Having Too Much Debt If You Can’t Save $1000 Quickly

Saving money is really necessary and important. You should always contribute some part of your salary for an emergency fund. If you are living in countries like the US then you should have a $1000 emergency fund.

If you do not have this emergency fund and even if you can not save 1000 dollars within the next 3 months then you are having too much debt. Yes, if you are not able to build this minimum emergency fund that means your most part of income is being used only for repayment of loans.

8. Applying for New Loans to Pay Off Old Debt

In my real life also I’ve seen some youngsters who opt for new debts to clear old debts. If you are also doing so, this is the clear sign of too much debt.

Well, there are many other ways to pay off debt quickly by earning extra money. So I suggest not to opt for new debts to pay off old debts. This will result in still more debts in your life. And you may not be able to come out of debt easily if you go on opting for new debts.

9. Net Worth should not be less than ZERO

Balance your assets and liabilities. In simple words, your debts should not be more than your assets. That means your net worth should not be negative.

If your net worth is less than zero then without any doubt you are having too much debt. And this situation actually dangerous. So you should pay attention to your all the debts.

10. If Your Pockets are always empty to pay MONTHLY BILLS You Are Having Too Much Debt

No matter whether you have a student loan or any other debts, too much debt is really stressful. If you are not able to pay your bills and not able to manage money for monthly essentials you are having too much debt.

Every month if you pay off your debt and at the end of the month if you struggle to pay a grocery bill or utility bill then you are carrying too much debt.

11. Your Credit card PAYMENT is MORE than Your Mortgage Loan

Usually, the mortgage loan amount is more than credit card payments. But if you are paying off more credit card payment than a mortgage loan that means your debt is too much. You should be careful about your credit card debt.

So if your overall credit card payment is more than your mortgage then now it’s time to be serious about your debt. I say never ever create such a situation where your credit card payment crosses a certain limit.

12. Poor Credit Card Score Means Too Much Debt

Credit card scores define your credit status. If you use a credit card too much and do not pay off on time then your credit scores will be low. This is the sign of too much debt.

You should pay attention to your credit scores by being aware of your expenses. Maintaining good credit scores have their own advantages. So do not opt for too much debt through your credit cards.

13. If Your Creditors Call You Often You Are Having Too Much Debt

If you find your creditors’ name in your phone call list often rather than your best friend’s name then you have too much debt!

Usually, credit agencies call often when the due date is over. So make sure you pay off all the debt timely. If you are not able to pay off monthly payment and getting calls from your creditors that means you are in too much debt.

14. You Have Too Much Debt, If You are SKIPPING YOUR MONTHLY PAYMENT 

When you start to skip your monthly payment of a debt that means you are not able to manage that debt. You are carrying more debt beyond a perfect DTI ratio.

So always live below your means by being frugal and make timely payments. If you don’t, then you will have to pay more interest and your debt will go on increasing.

15. You are not able to make more than a MINIMUM PAYMENT every month

Minimum payment means usually paying off the monthly interest on your debt. If you are hardly paying off only minimum payment and not able to pay off a part of the principle then you are carrying a huge debt.

So you must always be careful before choosing debt for you. You should calculate how you will pay off your debt quickly. If you are not able to pay off more than minimum payment this reflects that you are having too much debt.

16. Getting charged ‘over-the-limit fee’ on credit cards

There are some rules to use your credit cards. So if you are overusing and using more than the limits then you will have to bear the extra fees.

And if you are frequently paying fees for over-the-limit, you have too much credit card debt. So you should set your own limits to avoid too much debt. Use your credit cards carefully and never opt for too much debt. If you have a credit card that does not mean that you have to use it every time.

17. You are NOT able to SAVE MONEY even if you get advance salary

If you get advance salaries and still if you are not able to save money every month, you are having too much debt. That means, you are using your advance salary to pay off debt with your advance salary but still, you struggle to come out of debt.

This type of life includes a lot of financial stress. You feel like you will not be having financial freedom in your life. So do not walk on the path of debts that closes all the doors of financial freedom.

18. Selling out your house to PAY OFF DEBT is too much debt

I’ve realized that when debt is too much then people sell out valuable things like car, gold and much more to pay off debt.

And when people do not find any other hope to pay off debt then they think of selling out their own house. So if you ever felt like selling out your house to clear debts then this is too much debt.

19. Know How Much Personal Loan is Too Much in Canada

Taking a personal loan for marriage or parties is not actually necessary. But if you have taken a loan or if you want to take a personal loan then do not opt for too much debt.

If at all you want to take debt for a wedding then I feel that you should be able to pay off it within 2-3 years. If you are not able to pay off within 2-3 years then you should reduce the amount. Take an affordable loan.

Debt-Free Life is a Happy Life in Canada

You should always try to come out of debt quickly. You can even earn more money to pay off debt as soon as possible. I feel that debt-free life is a happy life. So avoid getting tapped into too much debt.

Taking Loans Should Be the Last Option

If every time when the days are rainy and you go on opting for loans then you will not come out of debt quickly. You should try to figure out other options to get money instead of taking loans.

You can try outside hustle to increase your income instead of taking payday loans. You can avoid some parties with friends to save extra bucks. This way you can actually avoid too much debt.

So always consider these 19 warning signs while analyzing how much debt is too much in Canada. Lead a happier life without any financial stress.

Hi. I’m Ankita. I’m here to help you adapt to frugality happily 🙂 I love learning new things. Nowadays I’m learning more about saving money and frugality. So on Frugal Beat together we will learn to create financial magic.

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