Debt Steps to Consolidation

Debt consolidation is when you take out a large line of credit or loan to pay back higher interest debts.

The advantage of consolidating is that lines of credit or consolidation loans have lower interest rates than credit cards or payday loans so you reduce the amount of interest you have to pay, which helps pay you slam your debt into oblivion. Set up an appointment with your financial institution to see if you qualify for any of these methods to help pay your debt down faster!

Typical consolidation methods.


  1. Unsecured Line of Credit
  2. Secured Line of Credit
  3. Consolidation Loan



An unsecured line of credit is an open debt where you are only required to pay the minimum monthly payments on what you’ve borrowed. If you have a line of credit that allows you to borrow up to $10,000, you can borrow up to $10,000 at any time and repay it at any time as well. However, you’d only pay interest on the amount you used. So, if you only borrowed $2000, you’d only pay the minimum payment on $2000 even though you can borrow up to $10,000.


The interest rates for lines of credit tend to be much lower than credit cards. The interest rates are typically floating so they move up and down depending on what the Bank of Canada and your lender set rates at.


Here’s the catch. You have to qualify for a line of credit. The Financial Consumer Agency says lenders usually need an income of $35,000 – $50,000 and it will depend on how much other debt you have and your credit rating.


Another way to help you qualify for a line of credit is to get a secured line of credit. A secured line of credit is a line of credit that is secured against an asset like your home.


Secured lines of credit are easier to approve you for because of the collateral and may actually offer lower interest rates than an unsecured line of credit.


Lines of credit can be a great way to consolidate your high interest credit card debt. The one con of a line of credit is that, unlike a consolidation loan, you’re not put on a timeline to pay it back. You could just pay the minimum for a long time but you’re not moving towards living Debt-Free.


A consolidation loan is not the same as a consolidating your debt on a line of credit.  A consolidation loan is a type of personal loan where you borrow a lump sum of money, pay down your smaller, higher interest rate loans like credit cards and then you have to pay it back on a monthly payment. Approval criteria will vary vastly from lenders offering debt consolidation.


With any debt consolidation, you’d be borrowing more money so this can impact your credit score as your credit utilization may stretch even further if the other credit facilities are closed when paid out. But it can also have a positive impact in the long run by making it easier to make payments on time.

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What separates this book from all the others is real insight on how people interact with money. Practical, readable, fresh advice here.”

—Rob Carrick Personal finance columnist, The Globe and Mail

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