Debt consolidation in Canada
Debt consolidation loans in Canada: combine eligible debts carefully
A debt consolidation loan may combine several eligible balances into one scheduled payment. It can simplify repayment, but it only helps when the new loan’s full cost and payment schedule improve your situation.
What is a debt consolidation loan?
Debt consolidation uses a new personal installment loan to repay or replace selected debts. As a result, you may manage one scheduled payment instead of several different payment dates.
However, consolidation does not erase debt. It only changes the structure, rate, term or payment schedule. For example, a longer term may lower each payment, but it can also increase the total interest you pay.
Debts you may be able to consolidate
Credit-card balances
You may include higher-rate revolving balances when the new total cost is lower. However, avoid using the paid-off cards again right away.
Payday-loan balances
Qualifying borrowers may request consolidation. However, GoodLoan must confirm lender payoff amounts and final eligibility.
Other personal debts
GoodLoan may consider certain unsecured loans or bills when its policy and the final agreement allow them.
Secured debts, tax debts and court-ordered payments may need a different solution. In addition, some debts may not qualify.
When consolidation may make sense
- The new APR and fees are lower than the blended cost of existing debts
- The payment fits your budget without relying on new borrowing
- The total repayment is acceptable
- You have a plan to avoid rebuilding paid-off balances
- You do not extend the term only to make the payment look cheaper
Compare before signing
List each balance, APR, minimum payment and estimated payoff period. Then compare the proposed consolidation principal, APR, number of payments, total cost of borrowing and total repayment.
How to prepare to consolidate payday loans
List each lender, the current balance, the next due date and any scheduled debit. Request an up-to-date payoff amount so you can compare the total debt with a proposed consolidation loan. Check the new payment, total repayment and how much income remains after essential expenses.
Confirm who will pay each creditor and when. Continue to follow your existing payment arrangements until a payoff is confirmed; a submitted application does not settle a debt or cancel an existing debit. Read our guide to alternatives to payday loans if another loan would leave your budget short.
How GoodLoan assesses an application
GoodLoan may review verified income, employment, bank activity, housing costs, current debts, credit information and the requested amount. In addition, applicants may need to provide creditor statements or current payoff amounts. GoodLoan may also request identification, paystubs and bank statements.
GoodLoan does not guarantee that you can consolidate every debt or save money. Therefore, compare any approved offer with your current repayment plan.
Alternatives to a consolidation loan
First, ask creditors about payment-help programs. You could also create a clear budget or pay more toward the highest-cost balance. In addition, consider speaking with a trusted nonprofit credit counsellor. A debt-management plan or another option may work better for some borrowers.
Debt consolidation questions
Does consolidation improve my credit score?
No one can guarantee an improvement. For example, payment history, balances, new inquiries and future credit use may all affect your credit information.
Can I consolidate payday loans?
Potentially, subject to eligibility, payoff verification, affordability and product availability.
Will GoodLoan pay creditors directly?
Funding and payoff steps depend on the approved product and agreement. Therefore, wait for confirmation before you assume GoodLoan has paid a creditor.
Can I consolidate with lower credit?
A lower score does not automatically decide the application. GoodLoan also reviews your ability to repay. However, GoodLoan does not guarantee approval.
Compare the numbers, not only the payment
Review your current debt costs and the proposed loan’s total repayment before making a decision.
GoodLoan reviews eligibility, verification, affordability, underwriting and provincial availability. GoodLoan does not guarantee approval or funding. Finally, your agreement and cost-of-borrowing disclosure show the terms that apply.