How to Consolidate Debt in Canada 2026

Debt Consolidation Savings Calculator

Enter your current debts, then your proposed consolidation loan to see how much you could save.

What Is Debt Consolidation?

Debt consolidation means combining multiple debts — credit cards, lines of credit, payday loans, car loans — into a single loan or payment, ideally at a lower interest rate. Done correctly, consolidation can save you thousands in interest and simplify your finances to one payment per month.

In Canada, there are four main consolidation paths, each suited to a different financial situation:

Option 1: Debt Consolidation Loan

A personal loan from a bank, credit union, or online lender used to pay off existing debts. Rates typically range from 7–19% depending on your credit score. You need a score of at least 650 to qualify at a bank; credit unions sometimes work with members at 600+.

Best for: People with good credit (650+) and a stable income who are overwhelmed by multiple credit card payments at 20%+.

Option 2: Balance Transfer Credit Card

Move high-interest credit card balances to a card offering 0% or a low promotional rate (typically 0–1.99%) for 6–12 months. Common Canadian options include MBNA True Line Mastercard (0% for 12 months, 3% transfer fee) and the Scotiabank Value Visa (0.99% for 6 months).

Best for: People with good credit who have $5,000–$20,000 in credit card debt and can pay it off aggressively during the promotional window.

Option 3: Home Equity (HELOC or Refinance)

Canadian homeowners can borrow against their home equity at prime + 0.5–1% (roughly 6–7% currently). A HELOC provides revolving credit; a mortgage refinance rolls debt into your mortgage at the mortgage rate. Both carry significant risk — your home is collateral.

Best for: Homeowners with significant equity and discipline. Rolling credit card debt into a 25-year mortgage is catastrophically expensive long-term even at a lower rate.

Option 4: Consumer Proposal or Credit Counselling DMP

If your debt is unmanageable (over $30,000 or over 40% of annual income), formal solutions may be more appropriate. A consumer proposal can reduce your total debt by 30–80% and freeze all interest. A debt management plan through a non-profit credit counsellor negotiates reduced interest rates without touching principal.

How to Qualify for a Debt Consolidation Loan in Canada

• Credit score: 650+ for most banks; 620–649 for credit unions and some online lenders
• Debt-to-income ratio: Total monthly debt payments should be under 44% of gross monthly income (TDS ratio)
• Employment: Minimum 3–6 months at current employer; self-employed typically need 2 years of NOAs
• Collateral: Secured loans (backed by car or home) get lower rates but carry more risk

Steps to Consolidate Debt in Canada

1. List all debts with balances, rates, and minimum payments
2. Calculate your total monthly minimum payments and total balance
3. Get your credit score free from Borrowell (Equifax) or Credit Karma (TransUnion)
4. Compare rates from 3–5 lenders — your bank, a credit union, and an online lender like Loans Canada or goPeer
5. Apply for the consolidation loan before closing credit cards
6. Once approved, use funds to pay off debts completely — get zero balances confirmed
7. Set up automatic payments on the new consolidation loan
8. Keep credit cards open but cut them up to avoid adding new debt

Alternatives If You Don't Qualify

If you can't get a consolidation loan, explore non-profit credit counselling. Agencies accredited through NFCC (Non-profit Financial Credit Counselling) can set up a Debt Management Plan with creditors, often reducing interest to 0–9%. This doesn't require good credit — it requires commitment.

For debts over $30,000, speak with a Licensed Insolvency Trustee (LIT) about a consumer proposal. Initial consultations are always free by law.