Nearly half (48 per cent) of Canadians surveyed say they are just $200 away from financial insolvency, according to the MNP Consumer Debt Index.
One in four (26 per cent) among the group say they have no wiggle room at the end of the month because they don’t earn enough to make ends meet.
Confidence in the ability to repay debt is at the lowest level since tracking began in 2017.
“When there is this little room in the household budget, people can easily get trapped in an endless cycle of debt,” said Grant Bazian, President of MNP, in the report.
“This isn’t simply a matter of people living beyond their means. The reality is that too many households simply cannot make ends meet, however hard they try.”
A string of interest rate hikes by the Bank of Canada in 2018 stirred up anxiety among the indebted, but a central bank seemingly on hold has somewhat eased fears.
Still, 54 per cent say they are worried about repaying debt and 47 per cent say a rate hike will spell financial trouble.
“Canadians appear to be maxed out with no real plan for paying back what they have borrowed,” said Bazian.
“This raises many alarming questions about how and if consumer debt will be repaid, particularly if conditions deteriorate or interest rates rise.”
And yet, 67 per cent say they piled on more consumer debt and 44 per cent say they are borrowing just to cover living expenses.
“Credit has become inextricably woven into Canadian household budgets,” said Bazian.
“A whole industry has grown up around making that happen, from payday lenders to credit card companies, to buy-now-pay-later retail offers.”
Bazian says the vicious cycle leaves little room for paying down debt while socking away money for retirement.
Despite all this anxiety, 35 per cent say they expect their debt situation to improve within a year, while 45 per cent expect it will take five years.
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains