Debt Consolidation
Discover ways to consolidate your debt.

Find the Right Debt Consolidation Option for You
Debt Consolidation Services in Canada

Debt is a numbers game, and bringing the numbers down is your goal. Debt consolidation takes multiple debts or payments and combines them so that you only have one payment to make. Having fewer payments each month is always a relief, not to mention the savings you get if your debt is consolidated at a lower interest rate. But the thought of borrowing more money to pay off what you owe can be scary. Learn about the different debt consolidation options and services available in Canada so you can find the right solution for you.

Common Reasons to Consolidate Your Debt

There are many reasons why people want to consolidate their debts:

  • Living expenses have gone up and you can no longer make the monthly payments on all your debts.
  • Payments on high interest credit card debts are eating into your budget. You want to pay off these credit cards but you may have been turned down for a bank loan.
  • You’ve been keeping yourself afloat and paying debts using a line of credit or bank overdraft.
  • You’re unable to refinance your mortgage to consolidate debts like you have in the past.
  • You have so many debts that it’s hard to keep track of them all, causing missed or partial payments.
  • A build-up of payday loans due to debt problems, financial challenges like lost or reduced income, or unaffordable car loan payments.

Make Repayment Simple

Consolidation simplifies your finances. If you have multiple debts from multiple creditors with multiple interest rates, repayment schedules, and other conditions, then keeping track of them all can feel overwhelming. When you consolidate your debts or payments, you’ll only have to keep track of one payment. If some or all of the debts you’re carrying have high interest rates, then consolidating them with a lower interest rate will also save you money. All consolidation options do this, but they work in different ways. Get a snapshot of each with their pros and cons below.

Debt Consolidation Loan

A debt consolidation loan is when you borrow money to pay off other debt. The money from the new loan pays off the other debts, the accounts are often closed, and then you only make payments on this one new loan. A debt consolidation loan will often have a lower interest rate than what your other debts are charging you.

There might also be better terms and conditions, but each lender is different. When you apply for a consolidation loan, getting approved can become more difficult if you’re behind on your payments, or it could put assets like your home at risk if you use them as collateral. But the biggest danger with consolidation loans is that you can end up doubling your debt if you don’t carefully live with a budget while you’re paying off the loan.

Pros:

  • One payment
  • Better interest rate

Cons:

  • Need to qualify
  • Can make your debt load worse
  • Often requires collateral for the loan

 

Debt Consolidation Loan

A debt consolidation loan is when you borrow money to pay off other debt. The money from the new loan pays off the other debts, the accounts are often closed, and then you only make payments on this one new loan. A debt consolidation loan will often have a lower interest rate than what your other debts are charging you.

Close up of hand holding bills with a calculator and stack of coins

There might also be better terms and conditions, but each lender is different. When you apply for a consolidation loan, getting approved can become more difficult if you’re behind on your payments, or it could put assets like your home at risk if you use them as collateral. But the biggest danger with consolidation loans is that you can end up doubling your debt if you don’t carefully live with a budget while you’re paying off the loan.

Pros:

  • One payment
  • Better interest rate

Cons:

  • Need to qualify
  • Can make your debt load worse
  • Often requires collateral for the loan

Credit Card Balance Transfer
Debt Consolidation Using a Credit Card

Credit cards often offer attractive promotions, but these come with strict terms and conditions. Paying off your credit card debts with a new credit card (consolidating credit card debt onto one credit card) is possible, but it often doesn’t work out as planned. Even if the new card has a low interest rate to consolidate other debt, that low rate often won’t apply to any new purchases you make. Also, if you haven’t paid off the balance transfer amount by the time the promotional rate expires, you could be saddled with hefty payments.

However, one advantage of a balance transfer is flexibility: you can aggressively tackle the debt, but in an emergency, you can also temporarily fall back to making minimum payments.

Pros:

  • Payment flexibility
  • Low interest rate to start

Cons:

  • Need to qualify
  • Could keep you in debt longer
  • Promotional interest rates expire quickly
  • Typically switches to a very high interest rate

Credit Card Balance Transfer
Debt Consolidation Using a Credit Card

Credit cards often offer attractive promotions, but these come with strict terms and conditions. Paying off your credit card debts with a new credit card (consolidating credit card debt onto one credit card) is possible, but it often doesn’t work out as planned. Even if the new card has a low interest rate to consolidate other debt, that low rate often won’t apply to any new purchases you make. Also, if you haven’t paid off the balance transfer amount by the time the promotional rate expires, you could be saddled with hefty payments.

However, one advantage of a balance transfer is flexibility: you can aggressively tackle the debt, but in an emergency, you can also temporarily fall back to making minimum payments.

Pros:

  • Payment flexibility
  • Low interest rate to start

Cons:

  • Need to qualify
  • Could keep you in debt longer
  • Promotional interest rates expire quickly
  • Typically switches to a very high interest rate
Close up man hand holding credit card and mobile phone sitting at a table

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Using Home Equity to Consolidate Debts
Refinance Your Home or Get a Second Mortgage

Home equity is what’s left when you subtract what you owe on your house from what it’s worth. Some people think of home equity as how much they’ve paid off on their mortgage. Depending on how much equity you have in your home, you might be able to borrow against it and use the money you get to pay off debt. There are mortgage rules in Canada about using your home equity to consolidate debt. Before increasing your mortgage to deal with your debts, take out a second mortgage at a higher interest rate, or apply for a home equity loan, talk to an experienced credit counsellor. There are likely other options you may want to consider as well.

Pros:

  • Low interest rate if done through a bank or credit union
  • Flexible payment arrangements

Cons:

  • Super high fees & interest if done through a subprime lender
  • Must have enough equity in your home

Debt Settlement
A Less Often Used Way of Becoming Debt Free

When your finances have been severely impacted and it doesn’t look like the next 5-10 years will be better, but you do have a lump sum of money available, then offering your creditors a settlement might be possible. A debt settlement is a negotiated payment to immediately pay back only a part of the debts you owe in a one-time lump sum. In return, your creditors write off the rest. This will let you pay less than you owe and become debt free instantly, but it can be hard to get creditors to agree to your offer and you’ll need the money ready right away.

Your credit rating will also be affected for 6-7 years after the payment goes through, although that can be reduced to 2 years if you work with a non-profit organization like us.

Pros:

  • Repay less than you owe
  • Instant debt relief once creditors agree

Cons:

  • Lump sum needed before making an offer
  • Negotiations needed with creditors
  • Affects credit rating

Debt Settlement
A Less Often Used Way of Becoming Debt Free

When your finances have been severely impacted and it doesn’t look like the next 5-10 years will be better, but you do have a lump sum of money available, then offering your creditors a settlement might be possible. A debt settlement is a negotiated payment to immediately pay back only a part of the debts you owe in a one-time lump sum. In return, your creditors write off the rest. This will let you pay less than you owe and become debt free instantly, but it can be hard to get creditors to agree to your offer and you’ll need the money ready right away.

Your credit rating will also be affected for 6-7 years after the payment goes through, although that can be reduced to 2 years if you work with a non-profit organization like us.

Pros:

  • Repay less than you owe
  • Instant debt relief once creditors agree

Cons:

  • Lump sum needed before making an offer
  • Negotiations needed with creditors
  • Affects credit rating
Two men talking at an office table, looking at a document

File a Consumer Proposal
Through a Bankruptcy Trustee (now called Licensed Insolvency Trustees)

Most people know about bankruptcy, but not as many know about a consumer proposal. It’s a legal agreement between you and your creditors arranged and administered by a bankruptcy trustee, to repay your debt with monthly payments that can stretch to almost 5 years. Instead of consolidating your debts into one loan, it consolidates your debt payments. Your debts will still be with your creditors, but the amount you pay your trustee each month is disbursed to your creditors after their fee is deducted.

Like bankruptcy, filing a consumer proposal is a big decision that will affect your credit for years to come and can even impact future career opportunities. Similar to bankruptcy, the amount of debt you have to repay is often reduced if your creditors agree to the proposal your trustee puts forward. This often results in lower monthly payments.

Pros:

  • No interest
  • Often repay less than you owe
  • Pauses active debt collection on student loans

Cons:

  • Not private – consumer proposals are a permanent public record
  • Typically does a lot of damage to your credit rating for about 8 years
  • Missing more than 3 payments ends your proposal and you can’t file another one

File a Consumer Proposal
Through a Bankruptcy Trustee (now called Licensed Insolvency Trustees)

Most people know about bankruptcy, but not as many know about a consumer proposal. It’s a legal agreement between you and your creditors arranged and administered by a bankruptcy trustee, to repay your debt with monthly payments that can stretch to almost 5 years. Instead of consolidating your debts into one loan, it consolidates your debt payments. Your debts will still be with your creditors, but the amount you pay your trustee each month is disbursed to your creditors after their fee is deducted.

Young couple shaking hands of a counsellor

Like bankruptcy, filing a consumer proposal is a big decision that will affect your credit for years to come and can even impact future career opportunities. Similar to bankruptcy, the amount of debt you have to repay is often reduced if your creditors agree to the proposal your trustee puts forward. This often results in lower monthly payments.

Pros:

  • No interest
  • Often repay less than you owe
  • Pauses active debt collection on student loans

Cons:

  • Not private – consumer proposals are a permanent public record
  • Typically does a lot of damage to your credit rating for about 8 years
  • Missing more than 3 payments ends your proposal and you can’t file another one

Debt Management Program (DMP)
A Private Way to Get Debt Relief & Get Out of Debt Without a Public Record

The journey to becoming debt free can be hard, so why walk it alone? Our debt management program gives you the benefits of payment consolidation and the guidance of an expert credit counsellor. A DMP doesn’t consolidate your debts, but rather consolidates your debt payments. We’ll talk with your creditors to combine your payments into one monthly sum that fits your budget. You pay this to us and we disburse it to your creditors, who will greatly reduce or waive the interest they charge you going forward.

Your credit counsellor will help you stay on track to becoming debt free and will even help you rebuild your credit rating afterwards.

Pros:

  • Greatly reduced or 0 interest
  • Debt free within 5 years
  • Private: DMPs are kept out of public records
  • Credit counselling support

Cons:

  • Can impact credit rating
  • Nominal fee
  • Not all debts can be included

Debt Management Program (DMP)
A Private Way to Get Debt Relief & Get Out of Debt Without a Public Record

The journey to becoming debt free can be hard, so why walk it alone? Our debt management program (DMP) gives you the benefits of payment consolidation and the guidance of an expert credit counsellor. A DMP doesn’t consolidate your debts, but rather consolidates your debt payments. We’ll negotiate with your creditors to combine your payments into one monthly amount that fits your budget and to greatly reduce or waive the interest they charge you going forward. So you end up making one monthly payment to us and we disburse it to your creditors.

Your credit counsellor will help you stay on track to becoming debt free and can even help you rebuild your credit rating afterwards.

Pros:

  • Greatly reduced or 0% interest
  • Debt free within 5 years
  • Private: DMPs are kept out of public records
  • Credit counselling support

Cons:

  • Can impact credit rating
  • Nominal fee
  • Not all debts can be included
Counsellor smiling at a couple

Not sure which option is right for you?

Get answers from an expert.

With so many debt consolidation options out there, it can feel overwhelming to try and find the right one by yourself. One of our professional credit counsellors would be happy to guide you through this process by carefully reviewing your whole financial situation with you and answering any questions you have. Speaking with our certified counsellors is always free, confidential and without obligation. 

Happy mature woman looking away

CCS negotiated on my behalf to bring down my interest rates to zero

Excellent way to consolidate, to make payments towards the principle only! CCS negotiated on my behalf to bring down my interest rates to ZERO with all my creditors while I paid off the debt load, that would have taken me 150 years to pay off, accomplished in 4.5 years. Now I am debt free!

Lori

Find out how to get back on track.

Get the help you need. Find the right option that will work for your specific set of circumstances. Instead of endlessly looking through debt consolidation company reviews, let one of our experienced counsellors help you. If we can't fully help you, we'll refer you to an organization we trust that can or help you put together an action plan so you can get started on your next steps. Feel free to give us a call or chat with us online. We're here to help.

Get the clarity you need.

Explore all your options with objective debt consolidation advice.

When you’re going through financial difficulty there are a lot of options to consider. So it can be super helpful to sit down with an knowledgeable, non-profit credit counsellor who can objectively review all your debt consolidation options with you, give you the right advice and guidance, and help you make a plan to resolve your difficulties. Once you can see your way out, you can regain your peace of mind and follow your plan forward with confidence.

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Debt Management Program

You’re not alone if you’re wondering if a DMP is right for you. Here’s what it is and how it works.