Some finance experts are warning Canadians must wean themselves off debt, otherwise they face a major shock if interest rates rise.

"It could be catastrophic in terms of the whole economy," says financial counsellor Allen MacLeod.

Interest rates have been quite low in Canada for the past several years.

But Canadian paycheques have grown very slowly. To prop up their standard of living, many Canadians have resorted to cheap credit and stopped saving money.

Lines of credit have grown at a record pace in Canada, up 30 per in 2004 alone.

Holly McIntosh and Frank Lestage's bank offered them a line of credit a few years ago.

"They just give you the money and people spend and spend," Lestage said. "It doesn't take long to get it under control, but you have to realize what you're doing and that takes a while. You have to get in trouble to realize what's going on."

As one person told CTV: "It was supposed to be for emergencies, so if I needed cash really fast, then I would have it."

Once a person does have a line of credit, all they have to pay is the interest -- which is usually much less than a standard credit card's rate.

MacLeod says many people don't have a plan to repay the debt – a debt which is often secured by their home.

"They'll have a line of credit they'll never pay off and if interest rates go up it will completely throw off their monthly budget," he says.

Real estate agent Kevin Grimes says many of his clients have only put down five per cent towards a home.

"Young buyers and people who wouldn't necessarily be in a position to buy a home are now able to afford it," he says.

Vehicle sales are another major purchase where low interest rates help affordability.

But the Cassidy family will be buying a used truck, fearing an upward trend in interest rates.

"I think as things have gotten more expensive, we've (become) a need-to-have-now generation," says Cindy Cassidy.

And that's part of the problem, says consumer advocate Mel Fruitman: "Consumer debt as a whole in Canada exceeds consumer assets. That means we're on the brink."

MacLeod says personal bankruptcies are up more than 10 per cent since January.

Small business bankruptcies are up by a third already this year.

A contrary view

However, not everyone agrees that Canadians face a critical situation.

The TD Bank said this in a mid-February report: "…  there is no debt crisis looming in Canada.

"The share of personal income needed to keep a handle on debt interest costs was the lowest on record in 2004, which means that Canadians are not unduly burdened by their debt," wrote economist Eric Lascelles.

"And, the rising debt level has been more than offset by the growth in household assets. In fact, personal wealth rose by ten per cent last year in Canada – the fastest pace in almost a decade."

TD predicts modest increases in rates.

David Dodge, governor of the Bank of Canada, has said he will use interest rates to maintain price stability.

If he sees inflation rising, Dodge says he will raise rates.

The bank's next opportunity to raise rates comes April 12, although many observers don't think rate hikes will happen until late this summer.

In any event, some experts say Canadians should curb their credit use now, before it becomes more expensive.

With a report from CTV's Paula Newton