Debt Consolidation Loans in Canada: 5 Options Compared
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A debt consolidation loan replaces several debts with one loan and one payment, ideally at a lower interest rate. In Canada, it is one of five main ways to consolidate debt, alongside a personal line of credit, a home equity line of credit (HELOC), a balance transfer credit card, and a debt management plan through a non-profit credit counsellor. This guide compares each option as of October 18, 2026, including what to do if your credit is weak. For more borrowing guides, see our loans hub.
Consolidation only helps if the new rate is lower than what you pay now and if you stop adding to the old balances. The Financial Consumer Agency of Canada (FCAC) warns that a longer repayment period or a higher rate can make your debt bigger, not smaller.
How a debt consolidation loan works
You take on one new debt and use it to pay off several older ones. Credit card balances are the usual target, because their interest rates are high. After that, you make a single payment on a single schedule.
The new debt can be a loan with a fixed term, a revolving line of credit, or a credit card with a promotional rate. A debt management plan works differently: it is not a loan at all, but an agreement that a credit counsellor negotiates with your creditors.
Two numbers decide whether it works: the interest rate and the repayment period. A lower rate saves money. However, a longer term can cancel that saving, because you pay interest for more months.
5 ways to consolidate debt in Canada
The table below summarizes the five options. Details, rates and conditions follow.
| Option | Typical cost | Best for | Main risk |
|---|---|---|---|
| Debt consolidation loan | 8.99% to 35% APR, depending on lender and credit | Fixed payoff over 1 to 10 years | High rates if your credit is weak |
| Personal line of credit | Variable, tied to the 4.45% prime rate | Good credit and payment discipline | Interest-only payments, easy to re-borrow |
| HELOC or refinance | Often the lowest rate (secured by your home) | Homeowners with equity | Your home is at risk; refinance penalties |
| Balance transfer card | 0% for 9 to 12 months, 1% to 3% fee (our catalogue) | Balances you can clear within the promotion | Standard rate applies after the promotion |
| Debt management plan | Interest often reduced or removed; agency fees | Unsecured debt when you cannot get a better loan | Not all creditors accept; noted on your credit report |
1. Debt consolidation loan
A personal loan gives you a lump sum, a fixed term and regular payments. The FCAC lists both general personal loans and loans marketed for consolidation. Banks and online lenders publish very different ranges, as of October 18, 2026:
- TD: personal loans from $2,000, over 1 to 7 years
- CIBC: from $3,000, over 1 to 5 years, with no prepayment penalty
- RBC: from $5,000, over 1 to 10 years
- Spring Financial: $500 to $35,000, 6 to 84 months, APR of 9.99% to 35.00%
- Fairstone: $500 to $50,000; unsecured 29.99% to 34.99% (6 to 60 months), secured 19.99% to 25.99% (36 to 120 months)
- easyfinancial: unsecured $500 to $20,000 from 29.99%
LoanConnect is a comparison platform, not a lender. It shows offers from $500 to $50,000, at 8.99% to 35%, over 3 to 120 months. Your rate depends on your credit score, income and existing debt.
2. Personal line of credit
A line of credit lets you borrow up to a limit and pay interest only on what you use. The rate is normally variable and moves with the prime rate, which stands at 4.45% at the big banks as of October 18, 2026.
The FCAC notes that minimum payments often cover only the interest. You manage the principal yourself. If you keep drawing on the line, getting out of debt becomes harder.
3. HELOC or mortgage refinance
Homeowners can borrow against their equity. According to the FCAC, a HELOC can give you access to up to 65% of your home's value, and you can usually borrow up to 80% of the value in total. These products often carry the lowest rates, because your home secures them.
The trade-off is serious. If you cannot repay, you put your home at risk. Refinancing your mortgage can also trigger a prepayment penalty, so run the numbers first with our mortgage refinance calculator.
4. Balance transfer credit card
A balance transfer moves card debt to a new card with a low or 0% introductory rate. The FCAC says these promotions usually last 6 to 18 months, the transfer fee is usually a percentage of the amount moved, and you can lose the promotional rate if you miss a payment.
Three cards in our catalogue, as of October 18, 2026:
- CIBC Select Visa* Card: 0% for 10 months, 1% transfer fee, $29 annual fee ($0 the first year), standard balance transfer rate of 13.99%
- Scotiabank Value® Visa* Card: 0% for 9 months, 1% transfer fee, $29 annual fee ($0 the first year), standard rate of 13.99%
- MBNA True Line® Mastercard®: 0% for 12 months, 3% transfer fee, no annual fee, standard balance transfer rate of 17.99%
Promotions change often and conditions can vary by province, so read the issuer's terms before you apply. Compare more options on our best balance transfer credit cards page.
5. Debt management plan
A debt management plan is an informal proposal that a credit counsellor makes to your creditors. You make one payment to the agency, which pays your creditors. Creditors may reduce or eliminate interest, but you usually repay 100% of what you owe, according to the FCAC.
These plans usually cover credit cards, personal lines of credit and unsecured personal loans. They usually exclude mortgages and car loans. The Credit Counselling Society, a non-profit agency, says its plans pay off cards and unsecured debt within 5 years. Credit bureaus remove the plan from your report 2 years after you finish paying.
What a lower rate saves
The table below shows a $15,000 balance repaid with fixed monthly payments. It compares a credit card rate of 20.99% with possible consolidation loan rates. These are illustrations, not offers.
| Scenario | Interest rate | Term | Monthly payment | Total interest |
|---|---|---|---|---|
| Keep the credit card balance | 20.99% | 36 months | $565.05 | $5,341.76 |
| Low-rate consolidation loan | 9.99% | 36 months | $483.94 | $2,421.75 |
| Mid-rate consolidation loan | 12.99% | 36 months | $505.34 | $3,192.13 |
| Low-rate loan, longer term | 9.99% | 60 months | $318.63 | $4,117.91 |
| High-rate loan | 29.99% | 36 months | $636.69 | $7,920.89 |
| Loan at the legal ceiling | 34.99% | 36 months | $678.46 | $9,424.41 |
The lesson is clear. A low-rate loan saves almost $3,000 over 3 years. On the other hand, a high-rate loan costs more than keeping the card. Stretching a cheap loan to 5 years also eats much of the saving. You can model your own balances with our debt payoff calculator.
Debt consolidation with bad credit
With a weak score, lenders quote at the top of their range. Unsecured loans at Fairstone and easyfinancial start at 29.99%, as of October 18, 2026. At that level, consolidating credit cards with lower rates usually costs you more.
You still have options:
- Secured loan: Fairstone's secured loans run from 19.99% to 25.99%.
- Home equity: easyfinancial lends up to $150,000 against home equity, from 9.99%.
- Debt management plan: it is not a loan, so no lender has to approve your credit. Your creditors decide whether to accept the plan.
- Improve your score first: a few months of on-time payments can lower the rate you are offered. Our guide to credit scores in Canada explains what lenders look at.
Shop carefully. The FCAC warns that applying with several lenders in a short time may lower your credit score. Prequalification tools that use a soft check do not, as our article on whether checking your score lowers it explains.
Pitfalls to avoid
Most consolidation failures come from the same few mistakes.
- Stretching the term too far: a longer loan lowers the payment but can add thousands of dollars in interest.
- Running the cards back up: the FCAC warns that keeping the same spending habits leaves you with the new loan plus new card debt.
- Ignoring fees: balance transfer fees, loan set-up fees and debt management plan fees all reduce the saving.
- Missing a payment on a promotion: you can lose a 0% balance transfer rate after one missed payment.
- Paying a debt settlement company upfront: you may pay fees even if your creditors refuse to negotiate, according to the FCAC.
- Accepting a rate higher than your current debt: a loan at 29.99% does not help if your cards charge less.
When consolidation is not enough
If you cannot keep up with one consolidated payment, a loan will not fix the problem. A licensed insolvency trustee can assess your situation, usually for free. Trustees are licensed by the Office of the Superintendent of Bankruptcy and are the only professionals who can administer a consumer proposal or a bankruptcy.
Conclusion
Debt consolidation works when it lowers your rate without stretching your term too far. Start with the cheapest option you qualify for: a balance transfer for smaller balances you can clear within the promotion, a bank loan or line of credit if your credit is good, and home equity only if you accept the risk to your home. If no lender offers you a rate below your current one, a non-profit debt management plan is often the better route.
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Frequently asked questions about debt consolidation
Does debt consolidation hurt your credit score?
Applying for a loan or card creates a hard inquiry, which can lower your score slightly for a short time. Applying with several lenders in a short period can have a bigger effect, according to the FCAC. Over time, consolidation can help your score if you make every payment on time and keep your card balances low. A debt management plan appears on your credit report and is removed 2 years after you finish paying. Learn how scores are built in our guide to credit scores in Canada.
What credit score do you need for a debt consolidation loan?
There is no single cut-off. Banks such as TD, CIBC and RBC generally look for good credit and stable income. Online lenders accept weaker files, but at higher rates: Fairstone's unsecured loans run from 29.99% to 34.99% and easyfinancial's start at 29.99%, as of October 18, 2026. If the rate you are offered is higher than your current card rate, consolidation will not save money. Our article on what counts as a good credit score gives the usual ranges.
Is a balance transfer better than a consolidation loan?
A balance transfer is cheaper if you can repay the whole balance before the promotion ends. Cards in our catalogue offer 0% for 9 to 12 months, with transfer fees of 1% to 3%, as of October 18, 2026. A loan suits larger balances that need several years, because its rate and term are fixed. If you cannot clear the balance in time, the remainder moves to the card's standard rate. Compare offers on our balance transfer cards page.
Can I consolidate debt with a HELOC?
Yes, if you own a home with enough equity. The FCAC says a HELOC can give you access to up to 65% of your home's value, with total borrowing usually capped at 80%. Rates are often lower than unsecured loans because your home secures the debt. The risk is that you could lose your home if you cannot repay. Use our mortgage refinance calculator to compare a HELOC with refinancing.
How long does a debt management plan last?
The Credit Counselling Society, a non-profit agency, says its plans pay off credit cards and unsecured debt within 5 years. You usually repay 100% of the principal, but creditors may reduce or remove interest. Fees vary by agency and can include set-up and monthly administration fees, so ask before you sign. In Quebec, the FCAC points to the Associations coopératives d'économie familiale (ACEF) for budget counselling. Plan your monthly payment with our debt payoff calculator.
Are debt settlement companies a good idea?
Be cautious. The FCAC warns that some companies promise to solve debt quickly for a fraction of what you owe, or to fix your credit score fast. You may pay fees even if your creditors refuse to negotiate. No company can erase accurate information from your credit report. For a legal process that can reduce what you owe, only a licensed insolvency trustee can administer a consumer proposal. See our loans hub for more borrowing guides.
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