What is Debt Consolidation – All of Your Debt in One Place

Posted on 16 May 2019

What is Debt Consolidation?

Are you finding it difficult to keep track of monthly credit payments? If so, consolidating your debt may be the best option to lower your payments and simplify your finances. There are several forms of debt consolidation in Canada, and each one works differently. It is crucial to choose the option that is right for your financial situation. In this article, we explain the top choices for debt consolidation so that you can choose the solution that makes the most sense for you.

Spergel Debt Consolidation

Simply put, debt consolidation combines all your debt obligations into one monthly payment. In Canada, consumer proposals, debt management plans, and debt consolidation loans are among the top choices. Depending on the type you choose, you may be offered a lowered interest rate or even debt forgiveness. Consolidating your debts may help you regain control of your debt and change your financial outlook. Debt consolidation is a great way to simplify & save money:

  • Simplify – you can breathe more comfortably with a single monthly payment as opposed to the stress of trying to keep track of multiple debt payments.
  • Save money – you may be able to reduce interest rates with a consolidation loan or eliminate interest and repay less with a consumer proposal.

Consolidating Debt Through Consumer Proposals

A consumer proposal is often the more affordable option if you are looking to consolidate your credit into a single lower monthly payment. You can rest easy knowing that you will only pay what you can afford. A Licensed Insolvency Trustee (LIT) will work with you to determine how much you can financially afford to repay and negotiate with your creditors on your behalf. In many cases, you will repay up to 80% less than you owe interest-free. Consumer proposals can only be administered by a licensed trustee and are legally binding on all creditors. Here are just a few of the reasons why proposals are Canada’s #1 choice for debt relief:

  • No interest fees
  • You keep your assets
  • You only pay what you can afford
  • All debts are consolidated into single monthly payments
  • Debt forgiveness – you repay up to 80% less than you owe
  • Debt resolution – all unsecured debts are eliminated
  • Creditor protection – including wage garnishment and collection calls

Consolidate DebtIs a consumer proposal right for me?

We want to give you every possible option to help you achieve debt freedom. It is your decision to make. You choose the solution that makes the most sense for you. A licensed expert will review your budget for affordability and explain precisely how debt consolidation and consumer proposals work. For most Canadians, consumer proposals offer the most affordable way to manage and reduce debt. As long as your total unsecured debts do not exceed $250,000, a proposal may be the best form of debt consolidation for you. At Spergel, a Licensed Insolvency Trustee (LIT) will evaluate your finances and assist you in deciding if a consumer proposal is the right debt solution for you. Talk to us today to learn more.

Consolidating Through Debt Management Programs

In a debt management plan, a credit counselling agency will consolidate unsecured debts, such as credit cards, into single monthly payments paid directly to the agency. This type of plan is generally designed for people who can afford to pay their debts in full but do not qualify for a consolidation loan and would prefer to simplify their payments. This method does not offer debt forgiveness, and you must be able to pay your debts within the time period agreed upon. You are typically offered up to a maximum of 5 years to repay your total debts. An agent will also negotiate on your behalf for a lower interest rate or, in some cases, an interest-free plan.

A debt management plan may be an excellent option for the right person. With every plan you are guaranteed:

  • Consolidation of debts into single monthly payments
  • The ability to choose which debts are included or excluded in the plan
  • Possibility for reduced interest or interest-free payments (in some cases)
  • No more collection calls from the involved creditors

Sounds great, right? Here are a few things to consider:

  • Tax debts and payday loans cannot be included.
  • You can expect a 10% charge for administrative fees
  • A note of debt management will appear on your credit report.
  • You must be financially able to repay 100% of your debts.
  • Without the creditor’s approval, it will not stop wage garnishment orders.
  • Many payday loan companies do not accept debt management programs.
  • Debt management plans are not legally binding, and creditors may not agree to combine their debts.

Debt management plans are often best suited to people who are dealing with a few smaller unsecured debts.  For those looking for debt relief, it may be better to consider a consumer proposal, which only requires you to pay as little as 30% of your debts.

Consolidating Through A Loan

This form of debt consolidation involves taking out a single loan from the bank to pay off multiple smaller existing loans or debts. People can use consolidation loans for credit card balances, overdraft, bills, payday loans, and other types of smaller loans. In doing this, you basically tie all these debts together into one loan with one monthly payment – hence “consolidating” debts. This process simplifies your bills into a manageable monthly payment. A debt consolidation loan may have a lower interest rate than the rate you were paying on various credit cards, so the loan should reduce your interest payments. This will partially depend on your credit rating. A consolidation loan is also advantageous because it will not negatively impact your credit scores.

Advantages of refinancing:

  • A single monthly payment should make it easier to budget your income and expenses.
  • In most cases, interest rates for consolidation loans are not as high as they are for credit cards, meaning that the loan should reduce your interest payments.
  • As a result of lower interest payments and longer terms for repayment, the amount of your monthly credit payments may be reduced.

In order to be eligible for debt consolidation you must be able to meet the following criteria:

  • You must be employed, or have a steady source of income.
  • Must be able to provide the bank with a monthly budget in order to prove that you can make your loan payments.
  • You may require a co-signer or collateral assets (i.e. home or vehicle).

Financial institutions (such as banks or credit unions) issue traditional debt consolidation loans. A debt consolidation loan can also include a home equity loan, line of credit, or bank loan secured by an asset or guaranteed by co-signer.

There are a few things to keep in mind with a consolidation loan:

  • It is possible that you will not qualify for the loan.
  • Your monthly payment may be larger than you can afford.
  • You are still responsible for paying the full amount of debt, plus interest.
  • Interest rates may be higher if your credit score is lower.

While there are several pros to a consolidation loan, there is one significant disadvantage – your debt load remains the same. Let’s say you owe $15,000 on three credit cards – you may be able to qualify for a $15,000 consolidation loan, but you will still owe $15,000 plus interest.


  • If you currently have a low credit score, your interest rate may be high for the consolidation loan.
  • If you have lengthy repayment terms, it may actually take longer to become debt-free with a debt consolidation loan.
  • Plan and budget wisely or you may run the risk running up your credit card balances again, in addition to the consolidation loan you are paying off.
  • If interest rates rise, you can expect your monthly payments will increase.
  • Depending on your financial situation, you may or may not qualify for a loan.

The biggest drawback to this type of debt consolidation is that you remain in the same amount of debt.   As a result, your debt consolidation loan rearranges your debts into a tidy monthly payment, but the balance essentially remains the same, plus interest. If this is not financially feasible for you, a consumer proposal may be a better alternative.

Get help with debt consolidation!

Did you know that debt consolidation is just one of the many options for you to consider when seeking debt relief? We offer a free, no obligation consultation meeting to review all your debt solutions. At Spergel, we have helped thousands of people in Ontario just like you overcome their financial difficulties. Our dedicated team of Licensed Insolvency Trustees has the expertise to find the best solution tailored to your specific situation. We are always available to answer your questions in person, over the phone, or by email. Call us at today at 1-877-501-4321. You owe it to yourself!

Helpful starting information:

What to Bring to an Appointment

To get the debt help that you need, please bring a list of who you owe and how much to each, a list of everything you own and your monthly household budget. Don’t have everything right away? Don’t worry – We will guide you through each step.

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Your Information

We’ll walk you through our application process. But, if you want to prepare for your debt free assessment consultation in advance, download our information form and fill in what you can.

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If you’re ready to be debt free, it’s time to meet with one of our knowledgeable Licensed Insolvency Trustees at your convenience and get started

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