Debt Consolidation Loans in Canada

Consolidation loans offer borrowers the chance to combine high-interest debt such as student loans and credit cards and benefit from fixed monthly payments, lower interest rates, and fewer due dates. The main types to choose from are secured and unsecured, the former requiring collateral in the form of a vehicle or home.

Benefits of Debt Consolidation Loans

Combining high interest-rate liabilities can expedite payoff provided that your consolidation loan accrues less interest than the individual balances you owe. You will not only pay off your loan faster but will also save on interest charges. Additionally, if you have been making regular payments, consolidation can give your score a boost in just a couple of months. This is also because you are effectively lowering your credit utilization score. A third benefit is that combining multiple balances helps streamline your finances. Since you have a single payment to make, debt consolidation reduces the chances of missing a payment or making a late payment. Finally, consolidation loans are useful for paying off high-cost loans and revolving lines of credit such as title and payday loans and gas, retail, and standard credit cards. Secured debt such as boat or mortgage loans typically don’t qualify.

Secured and Unsecured Loans

Unsecured loans allow you to combine multiple unsecured balances like medical and card debt in a way that is easier and simpler to manage. In this case, there is no physical collateral to guarantee repayment. If you are in serious debt, however, it is unlikely that your bank will offer favorable terms. Secured loans require collateral and are easier to qualify for because your financial institution can seize and sell the collateral in case you are unable to keep up with payments. If you have poor credit, however, this is one option that might be worth considering. Consolidation loans for bad credit are easier to get approved for, and you may even get a good interest rate. Online lenders, local banks, and credit unions are some of the places to start your search.

Financing Offered by Canadian Banks

Bank of Montreal

A BMO consolidation loan is one option to secure the amount of money that works for your situation and pay it off on a set schedule. This option is a good choice for high-interest balances and allows you to repay your loans faster.


You can also apply for a CIBC consolidation loan to merge multiple outstanding balances. CIBC customers enjoy multiple benefits such as lower borrowing costs and payments, with a higher portion of the monthly payment going towards the balance and not interest. As borrowers have lower payments to make, this makes it easier to budget and manage other expenses. Customers also get the chance to choose from secured and unsecured debt financing. As an unsecured option and alternative to loan financing, CIBC offers a personal line of credit with a lower interest rate than standard credit cards. You can also use your home as collateral to borrow money and pay interest only on the amount you have used. You can borrow up to 80 percent of your home value and as little as $10,000.


A Scotiabank consolidation loan is yet another option to lower your interest costs and make your payments more manageable. Added benefits are fixed monthly payments, optional credit protection, the option to set automatic payment deductions, and a choice of unsecured and secured financing.


With the Royal Bank of Canada, you can choose from an RBC consolidation loan or line of credit and make one monthly payment at a lower rate. Another option is to use your home equity to get an even lower rate. If you have at least 20 percent equity, you qualify for a secured loan and can use the money for anything you need, whether buying a new car, renovation, or debt consolidation.

Toronto-Dominion Bank

You can apply for a TD consolidation loan to combine different types of debt, including credit card balances and student loans. Toronto-Dominion also features an easy-to-use debt consolidation calculator to find out how much you owe on lines of credit, credit cards, and loans. If your outstanding balance is $45,000, for example, you will pay off your debt in 36 months at a rate of 9 percent, with monthly payments of $1,430.99.

How to Consolidate Debt

Credit unions and banks offer consolidation loans as an option to merge multiple bills into a single balance. Credit unions may offer lower rates and more flexible terms to members which is helpful in case you have bad or fair credit. Banks offer competitive rates to borrowers with good credit, and you may also benefit from credit discounts and larger loan amounts.

Alternatives to Debt Consolidation Loans

Depending on your financial situation, income, number and type of outstanding debts, and credit report, you may also consider alternatives such as home equity line of credit, debt management plan, and balance transfer card. Other alternatives include debt settlement, credit counselling, and bankruptcy. Debt settlement is one option for borrowers who are seeking to eliminate a significant portion of their outstanding debt. Some finance providers offer to reduce your unpaid balance by as much as 50 percent but you also incur fees and your credit score will suffer. Credit counseling is yet another solution to look into whereby a counselor goes over your financial situation and offers guidance and advice on budgeting, debt and money management, and consumer credit. Some counselors also offer to negotiate on your behalf, waive any late fees and reduce the interest rate in an attempt to avoid bankruptcy. Finally, declaring bankruptcy is a last resort but sometimes it can be a wise decision. This is the case when your outstanding balances equal over half of your income.