Debt Consolidation Loans in Canada

When consolidation makes sense

• You are current on payments and your credit score still qualifies you for a lower rate
• Your total debt is manageable — you could repay it in 3–5 years at the new rate
• You have stopped adding to the balances (otherwise the cards fill up again)

When it does not

If you are already missing payments, the loan will likely be declined or offered at a high rate. Some lenders offering 'consolidation' to people with poor credit charge rates close to the legal maximum, which can make your situation worse.

Debt management plan (credit counselling)

A non-profit credit counselling agency can set up a debt management plan: you make one monthly payment to the agency, which pays your creditors. Creditors often reduce or waive interest, but you still repay the full principal, usually within five years. It is not a legal process, so creditors can decline to participate.

Consolidation vs. consumer proposal

A consumer proposal is the only option that reduces the principal without bankruptcy, and it does not require good credit. The trade-off is a credit-report notation and fees regulated by the Bankruptcy and Insolvency Act. If you can't qualify for a reasonable consolidation loan, a free consultation with a Licensed Insolvency Trustee is the next step.

Free tools

Related guides

• Consumer Proposal in Canada: How It WorksHow a consumer proposal works in Canada: who qualifies, the $250,000 limit, the 5-year maximum, the creditor vote, credit impact and what it costs.
• What Is a Licensed Insolvency Trustee?What a Licensed Insolvency Trustee does in Canada, how fees are regulated, what to bring to the first meeting and how to check a trustee's licence with the OSB.
• Your Rights When a Collection Agency CallsWhat collection agencies can and can't do in Canada, how to verify a debt, limitation periods by province, and which provincial regulator to complain to.