Loans
Debt Consolidation Loans in Canada
How combining debts into one loan works, when it saves money, and the traps that can leave you deeper in debt.
How does debt consolidation work?
You take one loan or line of credit, use it to pay off several debts, then make one payment instead of many.
Common options are a personal loan, a line of credit, a home equity loan or line of credit, and a balance transfer credit card with a low promotional rate.
Put it into practiceDebt Consolidation CalculatorDoes it save money?
It can. Moving $10,000 of credit card debt at 20.99% to a 3-year loan at 10% saves about $1,900 in interest.
Paying $376.70 a month, card debt at 20.99% takes 3 years to clear and costs about $3,561 in interest. A 3-year loan at 10% costs about $1,616 in interest, with a payment of $322.67 a month.
What are the risks?
A longer term, running the cards back up, and high-rate consolidation loans that cost as much as the debt they replace.
If the only offer you can get is near 35%, a consolidation loan may not help. Ask a non-profit credit counselling agency about a debt management plan.
Applying to many lenders in a short time can lower your score; use pre-qualification where you can.
Keep reading
DebtConsumer Proposal vs Bankruptcy in CanadaBoth are legal ways out of debt you can’t repay, arranged through a Licensed Insolvency Trustee. How they differ in what you pay, how long they last, what happens to your assets and your credit.
LoansHow Personal Loans Work in CanadaWhat a personal loan is, how lenders set your rate, what it costs and what you need to apply, explained step by step.
LoansSecured vs Unsecured LoansWhat collateral means, how it changes the rate, and what you risk if you can’t pay.
LoansLoans with Bad Credit in CanadaWho lends to people with poor or no credit, what it costs, and safer ways to borrow or rebuild.
Official sources and further reading
Terms vary by product. Confirm the provider’s current terms before acting. This guide does not predict approval, realized value or credit-score changes. How WalletReturn calculates value