The reality is that more and more Canadians are lagging behind credit payments. The cost of living surges across the country thanks to surges in inflation following the pandemic lockdown. And credit card interest rates? They sit 20% or more, which means even a small balance can quickly turn into a monster. In a recent RateHub.ca survey, 50% of respondents said they took a loan (student, car or individual) while 41% took over more than $1,000 in debt. (Ratehub.ca and moneysense.ca are both owned by RateHub Inc.)
Even if you keep up with the minimum monthly payment, credit card interest can consume your progress; like financial speed. But here is good news: You don’t need perfect scores to start turning things around. In this article, we will cover different options to get back on track, including debt consolidation, low interest credit cards, and more.
Consolidated debt may mean lower interest fees
For some Canadians struggling to pay off multiple debts, a debt consolidation loan may be the best solution. With a loan you can pay off these credit cards, exchange over 20% of interest rates for lower rates, and then focus on making a predictable monthly payment. When you have more cash, and occasionally extra payments, you can really start raising money on that debt mountain.
The “secret sauce” here is not just about getting a loan, it also allows you to choose the right terms and then pay it back consistently. Debt consolidation loans are very effective for Canadians who want to stop debt and improve their credit score. Read on for more details, as well as other options to consider.
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Why does “bad credit” bring so much shame?
Many Canadians are talking about money and finances, not to mention debt and bad credibility.
Poor credibility or taking on debt often brings negative stigma, which can lead to shame. Therefore, people may avoid seeking help when debt is getting out of control. When this happens, people may turn to payday loans or other types of predatory loans and at sky-high interest rates, which only makes the situation worse.
If you are struggling with debt, you are not alone. According to Credit equifax Canada, the average non-collateralized debt per Canadian consumer was C$22,147 as of the second quarter of 2025.
Bad credit and debt can make us feel like we can’t control our lives, and they will feel like the pressure on our chests is getting heavier and heavier every day. While this stigma can become unbearable, I’m here to tell you that there is a legal financial tool that can help you improve your debt position and credit score in one shot.
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Can lending actually be part of the solution?
It seems counterintuitive, doesn’t it? Take on more debts to pay off your old debt? You are not wrong, but if done correctly, a debt consolidation loan can achieve what I mentioned earlier: repay your debt while improving your credit score. Still don’t believe me? This is how it works.
What is a debt consolidation loan?
In Canada, a debt consolidation loan is a personal loan that you can combine your debt into one payment. Ideally, this will allow you to eliminate high interest debt in exchange for monthly payments at lower interest rates. You don’t have to worry about paying off your credit card, student loan and car loan, but you just need to pay off your debt consolidation loan.
This can simplify your financial situation and simplify your debt and gain the benefits of saving you money at lower interest rates. Most Canadian financial institutions can offer debt consolidation loans, including banks, credit unions, and even online lenders.
How does a debt consolidation loan help rebuild your credit score?
- Lower debt ratio: Your debt ratio is the amount you are liable for when compared to the credit you can use. This is a key factor in determining your credit score.
- Managed payments: With a debt consolidation loan, you pay monthly, not for different debts. This can help you budget your money and even pay off your debts faster.
- Schedule of payment: Debt consolidated loans also come with clear fixed term and payment schedule. This gives you an end date to pay off all debts.
- Diversified credit portfolio: Interestingly, lenders love to see people can handle different types of credit and manage them well. This can help improve your credit score.
- Indicates that the debt repayment is responsible: This is probably one of the biggest ways debt consolidation can improve credit scores. Always pay on time to show that you are reliable and it can provide you with a record of future loan applications.
Who merges the loan no correct
I’ve talked a lot about debt consolidation loans are a great way to pay off debts and improve financial situations. But sometimes, even a consolidated loan isn’t enough to help someone control their debt. Here are some examples of people who should not consider a merged loan:
- Those who are reluctant to change their consumption habits
- Those who have no plans to repay continue their debts
- People who don’t have enough stable income to keep up with payments
How to Get a Debt Consolidation Loan in Canada
- Application process: Most financial institutions have their own application process and approval standards. Basic credit checks are also the criteria for eligible for these loans.
- Required Documents: Typically, you will need to provide financial documents including proof of income or recent compensation storage, income tax returns, and current debt and assets lists.
- Who is qualified? This will vary by organization. Usually, lenders seek stable income.
- Types of debt covered: These loans cover most unsecured debts, meaning those without collateral. These can include credit card debt, personal loans and some credit limits.
Other options to consider
If a debt consolidation loan is not suitable for your financial situation, you may want to consider other options:
- Low-interest credit card: Lowering interest rates can help reduce the amount of debt you accumulate.
- Balance transfer credit card: This type of card offers lower interest rates for debt transferred from one or more high interest cards. Some people offer limited-time promotion periods with super low rates, even 0%.
- Credit limit: A bank or other financial institution’s personal credit limit allows you to borrow pre-set limits at rates below a typical credit card. Interest rates are usually variable, with no repayment schedule other than monthly interest payments.
- Family Net Worth Credit (HELOC): This is a credit line that your home secures, which means your home is the collateral for the money you borrow. Like personal credit lines, most HELOCs do not have a repayment schedule, except for monthly interest payments. Learn more about Helocs.
- Various saving methods: Anything you can do to reduce debt and increase income and savings. Cut spending or subscribe, or make side noises.
Canada’s best credit cards for balance transfer
My last thoughts
Debt is a horrible thing, and the stigma around it makes the situation worse. If you find yourself in debt, you need to act immediately before you can get too big to cope. Debt Consolidation Loans are a financial tool that can help you manage your debt more easily.
If you are in debt, it’s not too late to change. Create and stick to budget. Find ways to reduce your spending and earn more.
You don’t need to let debt define who you are. Use available tools to reclaim control. If you seriously consider paying off your debt and rebuilding your credit, then a merged loan is probably the smartest money you will ever pay this year.
