Debt Consolidation
Non-Profit Debt Consolidation Help in Canada
Find the Right Option for You
Dealing with multiple debts is stressful. Different due dates, different interest rates, and different creditors can make it hard to keep track of what you owe, let alone make a dent in it. Debt consolidation combines your debts or debt payments into one, so you have just one monthly payment to manage. That alone can bring real relief. And when you consolidate at a lower interest rate, you can also save a significant amount of money over time.
There are several ways to consolidate debt in Canada, and not all of them involve borrowing. Some suit people with good credit, others are designed for those who are struggling. This page explains your options clearly and honestly so that you can find the right path forward.
Want to get debt-free sooner? Call the Credit Counselling Society today to find out about debt management solutions.
What Is Debt Consolidation?
Debt consolidation is the process of combining multiple debts or debt payments into a single, more manageable payment. In some cases, the debts are merged into one new loan. In others, your payments are consolidated while your debts remain with your original creditors. Either way, the goal is the same – simplify your finances, reduce the interest you’re paying, and create a clear path to becoming debt-free.
There are many reasons Canadians choose to consolidate debt:
- You can no longer keep up with all your monthly debt payments
- High-interest credit card debt is eating into your budget every month
- You are over-committed to buy-now-pay-later (BNPL) plans
- You’ve been using a line of credit or bank overdraft to pay bills
- You’re unable to refinance your mortgage the way you have in the past
- You have so many debts that it’s hard to keep track, which can lead to missed or partial payments
If any of this sounds familiar, you’re not alone, and we are here to help you.
Debt Consolidation vs. Credit Consolidation: What’s the Difference?
You may have heard both terms and wondered whether they mean the same thing. In practice, they do because as soon as you use a credit product and have borrowed money, you are in debt. “Credit consolidation” and “debt consolidation” are used interchangeably in Canada to describe combining multiple debts or payments into one. Whether you’re dealing with credit card balances, personal loans, lines of credit, or other unsecured debts, the goal of consolidating debt is the same: one payment, lower interest, and a realistic plan to get rid of your debts.
Where people sometimes get confused is between options that actually merge your debts (like a consolidation loan, where a new loan pays off the old ones) and options that consolidate only the payments (like a Debt Management Program, where your debts remain with creditors but you make one monthly payment to an organization like CCS that distributes it). Understanding this difference can help you choose the right solution.
Ways to Consolidate Debt in Canada
There are several ways to consolidate debt in Canada, and it’s important to understand what makes each option different. Some methods involve actually merging your debts into a single new loan, meaning the original debts are paid off and replaced with one new loan. Others consolidate only your payments, so your debts stay with your creditors, but you make a single monthly payment to a third party, like CCS, who distributes the funds based on what creditors have agreed to.
Some of these options require you to borrow money to pay off existing debts (like a consolidation loan or home equity product). Others do not require borrowing at all (like a Debt Management Program or a consumer proposal). The best approach depends on your credit score, your income, the types of debts you carry, and your overall financial situation. Here’s a breakdown of each.
Debt Consolidation Loan
A debt consolidation loan is a personal loan that pays off your other debts, leaving you with one new loan, ideally at a lower interest rate. It can merge different types of debt, including credit cards, personal loans, payday loans, and overdue bills. To qualify, you’ll generally need a satisfactory credit score and, in many cases, collateral.
The biggest risk is re-accumulating debt. If you don’t follow a budget while paying off the loan, you may end up owing more than you started with. Speaking with a credit counsellor before applying can help you determine whether this option is right for you and how to succeed with it.
Pros:
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One monthly payment
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Potentially lower interest rate
Cons:
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Requires a good credit score to qualify
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Often requires collateral
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Risk of accumulating more debt without a budget
Ready for more information?
Credit Card Balance Transfer
A credit card balance transfer moves your existing credit card debt onto a new card with a low promotional interest rate. The flexibility is appealing because you can pay aggressively when you can afford to or fall back to minimum payments in a pinch. But promotional rates expire quickly, and if you haven’t paid off the balance by then, or you’ve added new charges, you could be hit with a very high interest rate on the remaining amount.
Pros:
- Payment flexibility
- Low interest rate to start
Cons:
- Need to qualify for the new card
- Promotional rates expire and switch to high-interest rates
- Could involve transfer fees
- Could keep you in debt longer if not managed carefully
Not sure if this is the right move for you?
Find Out What Options May Be Available to You
by Answering 9 Simple Questions
Just answer these easy, multiple-choice questions to get a look at your potential options. Within a few minutes, you'll be looking at summarized options and results that apply specifically to your situation.
Discover Your Options
Home Equity Line of Credit
If you own your home and have built up equity, you may be able to borrow against it to pay off debt. Home equity products, such as a home equity line of credit (HELOC), a second mortgage, or mortgage refinancing (which means renegotiating your mortgage to borrow more money), typically offer lower interest rates than unsecured loans. However, you’re putting your home up as collateral, and Canada has specific rules about how much equity you can access.
Be cautious about going through a private or subprime lender to try and get around some of the equity limits. Fees and interest rates through these lenders can be very high, sometimes making this option no better than staying with your credit card debt. Always speak with a credit counsellor before increasing your mortgage or taking on a second mortgage to pay off unsecured debt.
Pros:
- Low interest rate when done through a bank or credit union
- Flexible payment arrangements
Cons:
- Very high fees and interest if done through a private or subprime lender
- You must have sufficient equity in your home
- Your home is at risk if you can’t make your payments
Want to talk through your options first?
Debt Settlement
A debt settlement is a one-time lump sum payment that covers only a portion of what you owe. In exchange, your creditors agree to write off the rest. It can provide fast relief when your financial situation is severe, and you have a lump sum available, but it takes negotiation, the money must be ready right away, and your credit score will be affected for 6–7 years afterward.
If you work with a non-profit organization like the Credit Counselling Society, the credit impact may be reduced to 2 years. This is worth knowing if you’re comparing options.
Pros:
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Repay less than you owe
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Instant debt relief once creditors agree
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Useful when future income prospects are limited
Cons:
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A lump sum must be available before making an offer
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Creditors must agree; there’s no guarantee
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Significant impact on your credit rating
Would you like help evaluating whether this is right for you?
Consumer Proposal
A consumer proposal is a legally binding agreement between you and your creditors, arranged and administered by a Licensed Insolvency Trustee (LIT). It allows you to repay a reduced portion of your debt over a maximum of 5 years, combining all payments into one monthly amount. Your debts remain with your creditors, but your payments go to the trustee, who distributes them after deducting their fee.
Consumer proposals are a public record, similar to bankruptcy, and can significantly affect your credit rating for about 8 years. However, for people carrying a very high debt load, or who have assets they want to protect, it can be a more manageable path for dealing with the debts than bankruptcy.
Pros:
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No interest during the proposal period
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Often, you repay less than you owe
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Pauses active debt collection on qualifying debts
Cons:
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Permanent public record
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Significant damage to the credit rating typically lasts for about 8 years
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Missing more than 3 payments ends your proposal
Have questions about whether a consumer proposal is right for you?
Debt Management Program
A Debt Management Program (DMP) is a structured repayment plan set up by the Credit Counselling Society on your behalf. It doesn’t merge your debts into a new loan, so it doesn’t matter if you have bad credit. Instead, it combines your monthly debt payments into one, based on your budget. Your credit counsellor negotiates with your creditors to reduce or eliminate the interest on your unsecured debts going forward, and you make one affordable monthly payment to CCS, which we disburse to each creditor.
A DMP is private (not a public record), and the average person completes it in about 3 years, with up to 5 years time available if needed. Throughout the process, you’ll have ongoing support from a certified credit counsellor.
Pros:
- Greatly reduced or 0% interest
- Debt-free within 5 years
- Private, it’s kept out of public records
- Ongoing credit counselling support
Cons:
- Can impact your credit score while you’re on the program
- Nominal administration fee applies
- Not all debts can be included (unsecured debts only)
Not sure which option is right for you?
Get answers from our certified counsellors.
With so many debt consolidation options, finding the right one by yourself can be overwhelming. Our friendly, professional credit counsellors can guide you through this process by carefully reviewing your financial situation and answering any questions you have. Consolidated debt counselling from the Credit Counselling Society is always free, confidential, and without obligation. Reach out today.
Which Solution Makes the Most Sense for You?
Every financial situation is different. The chart below gives you a quick comparison of each debt consolidation service so you can see which options may suit your circumstances best. Use it as a starting point, then speak with one of our credit counsellors to get a clearer picture of which solution is right for you.
| Option | Start-Up Cost | Credit Impact | Borrowing Required | Time to Complete | Public Record | Best For |
|---|---|---|---|---|---|---|
| Consolidation Loan | Not Applicable | Med | Yes | 3–7 yrs | No | Good credit |
| Balance Transfer | Low | Med | Yes | 1–3+ yrs | No | Small balances |
| Home Equity (HELOC) | Med-High | Low | Yes | Flexible | No | Homeowners |
| Debt Settlement | Not Applicable | High | No | Immediate | No | Lump sum available |
| Consumer Proposal | Med | High | No | Up to 5 yrs | Yes | High debt load |
| Debt Mgmt Program (DMP) | Low | Moderate | No | Up to 5 yrs | No | Steady income |
Each option has its own specific conditions. If you have questions about any of the options above, we’re here to help.
Advantages of Debt Consolidation Through a Non-Profit
When you work with the Credit Counselling Society, you’re working with a nationally accredited, non-profit organization that has been helping Canadians manage and eliminate debt for three decades. Unlike for-profit debt consolidation companies, we don’t earn commissions or push products. Our only goal is to help you find the right solution.
- Consultations are completely free with no obligation and no pressure
- Confidential appointments by phone, online, or in person
- Certified credit counsellors with professional training and accreditation
- We negotiate with your creditors on your behalf
- Objective advice, we’ll only recommend what’s right for your situation
- If we can’t help you, we’ll refer you to a trusted organization that can
- Ongoing support when you’re on a program, not just at sign-up
- A credit rebuilding program available when you successfully complete a DMP
What to Expect Working With Us
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.
Ready to get started?
Speak with a certified credit counsellor confidentially, for free, and without obligation. Call 1-888-527-8999 or contact us online.
Potential Risks & Misconceptions (and How to Avoid Them)
Debt consolidation can be a powerful tool, but there are some common pitfalls and misconceptions worth knowing about before you decide to consolidate.
Misconception: Debt consolidation always means taking out a loan.
Not true. Several options including a Debt Management Program (DMP) and a consumer proposal don’t involve borrowing money at all. Your payments are reorganized, not your debts.
Misconception: Debt consolidation hurts your credit.
It depends on your starting point. If you’re behind with your payments and a consolidation loan or DMP gets you back on track, that will ultimately improve your credit rating. A consumer proposal or debt settlement has a more significant impact because a portion of the debt is written off (left unpaid). A credit counsellor can walk you through exactly what to expect based on your situation.
Risk: Re-accumulating debt after consolidation.
This is one of the most common pitfalls. Some financial experts estimate that up to 75% of people who take out consolidation loans accumulate debt again within a few years if they don’t change the spending habits that led to the problem. A budget is essential. That’s why working with one of our credit counsellors – who will help you build one and address the root cause of your debt – is so valuable.
Risk: High fees from for-profit debt consolidation companies.
Some for-profit debt consolidation services charge very high upfront and ongoing fees and interest rates, making the overall cost of borrowing far worse than the original debt. Others use misleading titles like “Debt Relief Specialist” or “Restructuring Consultant” without any formal credentials or accountability. Always verify who you’re working with. Non-profit credit counselling services are accredited, regulated, and transparent about costs.
Risk: Choosing the wrong option for your situation.
Not every option suits everyone, and choosing the wrong one could end up costing you additional time, money, or both. Your situation, debt type, credit score, and income all matter. Speaking with a credit counsellor before making any decisions is the safest way to make sure you’re on the right path.
Real Canadian Debt Consolidation Examples
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
There’s no single set of eligibility rules that applies to all consolidation options. Each is different and can vary even more between the various providers. But here are some general indicators that a debt consolidation service may be right for you:
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You have two or more unsecured debts (credit cards, personal loans, lines of credit, etc.)
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You’re finding it difficult to keep up with all your monthly payments
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You’re paying high interest rates that are making it hard to reduce what you owe
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You have a steady income, but feel like your debts are not getting smaller
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You want a structured, realistic plan to become debt-free
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You’re looking for a private solution that doesn’t involve public legal proceedings
Even if you’ve been turned down for a consolidation loan or have a low credit score, options like a Debt Management Program will usually still be available to you. The best way to find out exactly which options could work for you is to speak with a credit counsellor. There’s no cost and no obligation, and it will ensure that you make an informed decision.
Frequently Asked Questions (FAQ)
What is a Debt Consolidation Program with CCS?
At CCS, a Debt Consolidation Program is a Debt Management Program (DMP). It’s a structured repayment plan that combines all your unsecured debt payments into one affordable monthly payment. Your credit counsellor negotiates with your creditors to reduce or eliminate interest, and you make payments to CCS, which distributes the funds. Most clients complete the program within about 3 years. Learn more about the Debt Management Program.
Can I enter a Debt Consolidation Program with bad credit?
Yes. A Debt Management Program doesn’t require a credit check for eligibility or a minimum credit score to qualify. Deciding whether it’s right for you is based on your income, your debts, and your ability to make consistent monthly payments. If you’re struggling with debt but have been turned down elsewhere, a DMP may still be an option for you.
How long does it take to complete a Debt Consolidation Program?
Most people complete their Debt Management Program in about 3 years. The program allows up to 5 years if needed, depending on the amount of debt and the payment arrangement reached with your creditors.
Do I have to give up my credit cards in a Debt Consolidation Program?
Yes. In most cases, credit cards included in your DMP will need to be surrendered. This is actually a feature, not a drawback, because it protects you from accumulating more debt while you’re paying off what you already owe. But if you need one, say for work, CCS has a program to help you with a secured credit card once your program is on track.
Will creditors continue to contact me while I'm on a Debt Management Program?
Once your DMP is in place and your creditors have accepted the terms, contact from those creditors will stop. Your credit counsellor handles communication with your creditors on your behalf, which can significantly reduce stress.
Does a Debt Consolidation Program cost money?
There is a nominal administration fee to cover program costs. At CCS, we have a sliding fee scale capped at $125 per month. Despite this fee, most clients save substantially because they’re paying little to no interest on their debts throughout the program.
Where can I find debt consolidation help?
The Credit Counselling Society offers credit counselling and debt consolidation services across Canada in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland, Yukon, Northwest Territories, and Nunavut. You can speak with a counsellor in person, by phone, or online, and French language services are available too. Call 1-888-527-8999 or contact us online.
Does debt consolidation impact my credit score?
Normally, yes, but repaying your debt always looks better than not making your payments. The question is top of mind for every client, and your credit counsellor will walk you through the exact implications for the option you’re considering. A first consolidation loan has a relatively low impact. A DMP affects your credit report for two years after completion. A consumer proposal affects your credit rating for about 8 years. A debt settlement can affect your credit for 6–7 years, or 2 years if arranged through a non-profit.
When should I consolidate debt?
The sooner the better. Waiting often means paying more in interest and letting balances grow. If you’re finding it hard to make all your payments, if you’re only making minimum payments, or if your debt doesn’t seem to be going down, those are all signs to act now. A free appointment with a credit counsellor is a good first step, even if you’re just exploring your options.
Find out how to get debt relief
Get the help you need. Find the right debt management solutions for your specific needs and circumstances. Instead of endlessly looking for providers online, book a free appointment with the Credit Counselling Society and let one of our experienced counsellors help you.
If we can’t provide suitable debt management solutions or debt consolidation services, we’ll refer you to a trusted organization that can. Feel free to call or chat with us online.
See if a debt settlement makes sense for your situation.
Contact a non-profit credit counsellor.
Debt settlements are just one of 7 debt relief options available in Canada (5 are available in all provinces). Before deciding to pursue a specific option, it would be wise to speak with a credit counsellor, review your situation, and determine which option is going to help you achieve your financial goals. Speaking with our counsellors is always free and confidential.
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