Debt Solutions

Debt Solutions » Debt Consolidation

What is debt consolidation?

Debt consolidation is a method of combining multiple debts into one. A single debt consolidation loan can often reduce your interest charges into a single, simple, easier to manage repayment.

This help you take back control of your finances, and reduce the stress and other impacts debt creates in your daily life.

What is a debt consolidation program?

A debt consolidation program in Canada is a financial solution that allows individuals to combine multiple debts into a single repayment.

This process involves taking out a new loan to pay off existing debts, leaving the borrower with a single monthly payment to manage.

The primary goal of a debt consolidation program is to provide debt relief by simplifying finances and potentially reducing interest rates and monthly payments.

This approach can be particularly helpful for individuals with high-interest credit card debt, personal loans, or other unsecured debts that are difficult to manage.

By consolidating these debts, individuals can potentially lower their overall interest costs, reduce their monthly payments, and work towards being debt-free.

How does debt consolidation work?

The debt consolidation process typically involves the following steps:

Make a loan application

To consolidate debt, the first step is to apply for a debt consolidation loan from a bank or credit union, or other financial institution.

During the application process, you’ll need to provide information about your current debts, income, expenses, and credit score.

Get approved for the loan

If you’re approved for the loan, the lender will provide you with the funds to pay off your existing debts. This typically involves the lender sending payments directly to your creditors on your behalf.

Begin making your monthly payments

Once you consolidate debts, you’ll be making a single monthly payment to the lender instead of multiple payments to different creditors. This can make it easier to manage your finances and ensure that you’re making your minimum payments on time.

Repay the loan

You’ll need to make your monthly payments on time to repay the debt consolidation loan. Depending on the terms of the loan, this process can take several months to several years to complete.

What debts can be included in debt consolidation?

Most unsecured debt types can be included in your debt consolidation plan.

These may include:

  • Credit card debt: Credit cards are the most common debt types involved in debt consolidation loans – A high credit card balance is one of the main reason for consumers taking out consolidation loans
  • Credit Union unsecured debts or credit card debts
  • Retail store credit card debt
  • Unsecured personal loans: An unsecured loan, also known as an unsecured personal loan, is a loan that isn’t protected by a collateral item such as your home or vehicle, or another person co-signing for your repayments
  • Payday loans
  • Auto repossession debt If you failed to keep up payments for car loans, you might be able to include those in a debt consolidation plan
  • Home equity loan
  • Loans with a high interest rate
  • Utility bills
  • Cell phone bills
  • Gas cards
  • Non-government student loans A private or non-government insured student loan debt that is straining your finances can often be included in your debt consolidation
  • Medical bill debt Not all medical bills are eligible, but many are. Consult your credit counsellor to find out if your medical debts are appropriate for consolidation
  • Other unsecured lines of credit

Why do people use debt consolidation loans?

Debt consolidation can be a simple and effective way to manage your debt and help you save money in the long term.

Not only will a consolidation loan provide experience in budgeting, it allows you to repay various debts with one affordable monthly payment.

Your plan will include:

  • One monthly payment
  • A fixed-term to repay your debts
  • Reduced or removed interest charges
  • An end to collection calls and legal action
  • Professional guidance and advice

Advantages of debt consolidation

More affordable monthly payments

The key advantages of debt consolidation are that you will be making lower monthly payments that are affordable in line with your income and monthly expenses.

Improved quality of life

Hopefully, your quality of life will improve without the constant worry of struggling to pay back the money you’ve borrowed, but you must be willing to make the commitments required to repaying what you owe.

Repayments based on your budget

Your debt consolidation loan will be created within an acceptable budget designed exclusively around an acceptable standard of living for you in your personal circumstances.

That said, if you fail to follow the plan, you will be in danger of breaching the terms, and you may fall further into debt than before.

Access to credit counselling

An official debt consolidation program will give you access to a credit counsellor who will provide expert insight into the various options available to you.

Your program will provide information about budgeting your finances over the term of your consolidation loan, and for the future.

You will gain a better financial understanding to help avoid debt problems in the future and the knowledge to manage your budget to make savings and live a less stressful life.

Protection from creditors

By consolidating your debts, any harassment or legal action involved in the pursuit of those debts, or from payment collections, will stop immediately.

Improved credit score

A debt consolidation program can help you make a head start on repairing your credit report.

It will show future lenders that you took a responsible measure towards managing your debt, and on completion that you successfully repaid the full amount to your creditors.

Avoiding bankruptcy

Debt consolidation can help you avoid bankruptcy, a situation which has a severe impact on your financial future.

Disadvantages of a debt consolidation

Repaying debt in full

There’s no debt relief with a debt consolidation loan. It only consolidates debts.

You will still have to pay the full amount of what you owe, however, this is usually with a single monthly payment making debt management easier.

Taking on additional lines of credit

By freeing up existing debt facilities, for example, credit card, store credit, etc., you may be tempted to use these avenues to build up further debt.

It’s important to be aware that if you borrow money and add additional debt to any of your freed-up credit options could easily put you into a position where your total debt becomes unmanageable and impossible to pay back.

Higher interest rates

If your consolidation loan is designed to be repaid over an extended period of time, you may be charged higher interest rates.

Although your monthly payments could be lower and more manageable, you may end up repaying more money than you originally intended.

Potential loss of you home if you default

You may lose your home or the equity in your property if you use it as collateral against your loan.

If you fail to make repayments or regularly miss your payment dates, your lender is entitled to sell your home to recoup the loan amount and recover any losses.


Am I eligible for a debt consolidation loan?

To be eligible for debt consolidation, your total monthly debt will likely be higher than 20% of your income.

Debt consolidation is available for people in any situation. You will not be judged on your level of income or employment status.

Our professional debt experts will help find the most suitable consolidation plan for your unique situation and guide you through the whole process.

Where can I find out more about my debt consolidation options?

Before you sign up for debt consolidation or any other debt management program, you should always seek guidance from a debt professional. This is where A Fisher & Associates can help.

As a Licensed Insolvency Trustee (LIT) and provider of reliable debt solutions, we can explore all the debt relief options available to you and help you choose the one that best fits your circumstances.

For reliable debt advice and support to regain control of your finances, get in touch with one of our advisors today.

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How we can help you with your debt

You’re on your way to resolving your debt problems, this is what will happen next.

Fill out the form and arrange a call back with one of our debt advisors.

We will then run through all of the options available to you and advise you on which is the best option for you

We will then help you put the debt solution in place that will help you get back on track