Bad Credit Debt Consolidation

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Overwhelmed by endless debt repayments? 

Getting out of the vicious circle of debt is possible in Quebec, as in all provinces of Canada, through numerous debt relief solutions. Before choosing an extreme solution such as personal bankruptcy or a consumer proposal, there are many options available to you to regain control of your money. Among the many options for reorganizing your finances and keeping up with your payments is debt consolidation with bad credit, which will allow you to get out of the vortex of debt and get your finances in order.

What is debt consolidation?

Debt consolidation is used to reduce excessive debt due to loans with high interest charges, whether they come from credit cards or other types of loans. The operation consists of combining the debts of your various creditors into a single loan, with a lower interest rate, by reamortizing the whole over a period of up to 30 or 35 years.

This iscalled debt consolidation.

What are the benefits of debt consolidation?

Consolidate your credit card debts and avoid high interest charges.
A personal loan is often amortized over a short period of time, which results in a high monthly payment, credit cards also weigh heavily on a budget. In fact, it is often the case that the borrower pays almost nothing but interest and the debt only decreases very slowly with payments.

Did you know that if you have a credit card with 19.90% interest it will take more than 25 years to pay off your balance in full? 

When you are paying the minimum on your card and your balances are high, debt consolidation could be an interesting alternative.
Take advantage of better interest rates
With the possibility of renegotiating an interest rate to a more advantageous level as mentioned above, you will be able to avoid the high interest rates that weigh down your finances.

One monthly payment

Applying for a debt consolidation file allows you to deal with only one creditor. This way all your debts are combined into one.
You will have a lower payment and only one file to manage.

Improve your financial health

Finally, consolidating your debts into one loan will allow you to better manage your payments and improve your financial health by easing your payments and the pressure on your budget.


Disadvantages of a debt consolidation

A good credit rating is important

While it has many advantages, the debt consolidation solution can also have some disadvantages. A correct score is required to use this solution, there should be no outstanding accounts or these should be settled.

The better your score, the more competitive the interest rate offered will be.
Each situation is different and several factors must be considered on a case-by-case basis.


A sometimes high interest rate

Without a good score, the interest rate of a proposed debt consolidation may be higher.

How much will you save by doing a debt consolidation?

The main objective of a debt consolidation is to allow you to regain a balanced budget so that you can respect your commitments and restore your situation. It is important to understand that we will mainly focus our approach on the amount “saved” monthly to allow you to respect your budget.

The table below shows the minimum monthly payments



Credit Card #1

Credit Card #2

Consolidation loan


20 000 $

15 000 $

35 000 $

Interest rates




Monthly Payment

700,00 $

525,00 $

234,44 $

Number of months for full payment

342 Months

254 months

300 Months 

Consolidation allows you to lower your monthly payments by $1,015.00, so you can balance your budget.

Which banks offer debt consolidation with bad credit?

The banks that are best able to offer a suitable debt consolidation solution only deal with professionals such as mortgage brokers and are not accessible to the general public.

If you have a poor or mediocre credit rating, you may have difficulty applying for a consolidation of your finances. Financial institutions operating in Quebec and Canada are looking for borrowers with a good credit rating.
If you are having trouble finding a lender to consolidate your debts, don’t let your financial institution’s refusal stop you. Having a bad credit rating does not mean that you will not be able to consolidate your debts.
What is the easiest way to obtain a debt consolidation?
The mortgage broker is a professional who will analyze your situation and offer you an answer to your situation.
He will take stock of your situation and help you organize your finances, which will allow you to make significant savings on interest charges.

The broker has access to several banks and lenders, he will be able to compare the different offers and will propose the financial institution that will be the most likely to obtain the strategy that corresponds to the reality of your situation. 

How to qualify for a debt consolidation loan with bad credit?

If you have lost control of your credit score, there are several steps to take to get your debt consolidated. 

Credit score


As you can see, the credit score is a determining factor in obtaining a debt consolidation loan. So, you will want to look for as much improvement as possible before you apply. Sometimes there are errors in the files. Analyzing your file with an experienced mortgage broker can help you gain valuable credit score points (equifax or transunion) and will allow you to make the necessary corrections if necessary.


What to consider when choosing a debt consolidation loan

In your search for a consolidation loan, you will most likely come across several offers. How do you choose among these different options? Three major criteria should allow you to choose your loan: 

The amount of loan available.

Keep in mind that the purpose of the consolidation loan is to combine all your debts into one. It is therefore essential that the amount available fits this requirement, as without a recovery plan, you could fall back into a spiral where you will not be able to restore your financial situation.

APR (Annual Preferred Rate)

Do the math like in the chapter above. Does the new negotiated rate really save you money compared to your current payments?


The costs of the loan

Even though the rate may be advantageous, the fees associated with it can sometimes make the debt consolidation loan solution larger than your current debts. Also, remember to check the penalty fees in this new contract so that you know what to expect in the event of a default, your mortgage broker will guide you and give you all the terms and conditions related to the loan offers available. 

Precautions to take before consolidating debt


Take your time 

There are several players in the market and as said before, you will most likely have to look at several loan offers. After shopping around for quotes for your debt consolidation, read the terms of each offer carefully to avoid hidden fees.

Is your credit score high enough? 

Getting a great rate on your consolidation depends largely on your credit score. It may only take a few extra months to significantly improve your score. It is therefore sometimes useful to wait to be able to obtain a better rate when restructuring your liabilities.
Do not hesitate to ask our teams for advice to improve your credit score quickly.


Beware of “predatory” lenders

One person’s misfortune can make another person happy. Some private lenders are not always reputable. Beware of penalties, conditions and hidden fees. There are some “predatory” institutions or lenders on the market that will ultimately cause you problems and whose terms are very disadvantageous and will only make your debt situation worse. 

How do I apply for a debt consolidation loan?

Have you made up your mind and want to apply for a consolidation loan? Here are the steps to follow 

1 – Choose the mortgage broker who will meet your needs, you must explain your situation, do not hide anything, it is a professional who is there to help you and represent you, there is nothing worse for the broker than to discover that you have failed to give him information.

Make sure you gather the required documentation and send it to him/her without delay.

2 – When obtaining a mortgage, it is important to pay off your loan and credit card balances.

3 – In order to restore credit, it is essential to respect the payments and to respect the due dates.


The different types of debt consolidation loans available in Canada 

There are several types of loans. Several existing formulas can be adapted to a consolidation situation.

The personal loan

The use of a personal loan as part of a consolidation is the most commonly used method, however this solution often limits the repayment period and the payments are often larger.

As mentioned earlier, you can store for loans from a number of lending organizations such as banks or private lenders, however the expertise of a broker will be invaluable in getting you back on track.
If the loan is highly dependent on your income and credit score, there may be other levers you can use to get a great rate, such as putting up collateral or finding a co-signer. 


Use the home value of your house or apartment 

If you own a home or property in your own name, it is possible to use its home value to obtain credit to consolidate your debt. Home equity refers to the portion of the house that you have already paid off, if you acquired the house through a loan. Of course, this method only works if you own a property that you acquired through a mortgage or debt-free (fully paid).

Credit card balance transfer

Credit cards are one of the most common forms of debt. If your debt is mostly credit card related, many banks offer card balance transfers. The principle is the same as for a loan except that the consolidation is done through a single payment instead of multiple payments. All the credits on your different cards are combined.
You need to be on a budget, it can be very dangerous to proceed with new cards because of the high interest charges.
One option that might seem interesting could be the proposals of some banks or credit cards in a balance transfer offering 0% rates in the first months.

However, it is essential to pay back the totality during the promotion, otherwise the interest rate applied is often very high and is applied retroactively which can cost you a lot.


Alternatives to debt consolidation 

To get out of a bad financial situation, debt consolidation is not the only tool at your disposal. If you haven’t found a loan at a good rate to help you turn things around, there are alternatives to avoid bankruptcy or proposal.

The payment agreement with your creditors

One of the first solutions to consider is to simply renegotiate your debts with the people who own them. Even if the banks or financial institutions have no duty to you, they will usually be willing to listen to your proposals. Someone who clearly states his or her ability to repay, and who makes payments, even under different conditions than originally planned, is better for the financial institution than a client who is suffocated by debt and no longer able to pay at all.
However, this will have a negative impact on your credit file.

The line of credit or mortgage line of credit

A home equity line of credit, or home equity line of credit, is a loan that is based on the value of your home.
Either in combination with your mortgage. In this case also called home equity mortgage. The available credit is the amount you have already paid down on the mortgage of your property. If your mortgage line of credit increases as you repay your loan, it can never exceed 65% of the market value of your property.
Or independently. In this case, the credit is contracted with another lender and is not linked to the mortgage of your house and will be guaranteed only by the value of the property. This means that this line of credit is fixed. In the same way as in the previous case, it cannot exceed 65% of the purchase value of the property. 


The consumer proposal

The consumer proposal, also known as a proposal to creditors, will lead you to consult a financial recovery advisor, also known as a trustee in bankruptcy. Your proposal will be filed with the credit organizations to which you owe money.
He will become the sole interlocutor of the institutions to which you owe money. The figure of the financial recovery advisor has the advantage of removing the hassle of negotiating individually with the creditors.
However, the personal consequences are important and your credit file will be strongly impacted for a minimum of 5 years at the end of an obligation to pay the agreement, reducing the possibilities of taking out new loans for a long period.

Personal bankruptcy

The ultimate solution to over-indebtedness is personal bankruptcy, which is adopted by thousands of Canadians every year. Personal bankruptcy can be frightening, but it does not necessarily mean the loss of your assets and can allow you to free yourself if you can no longer meet your bill payments.
Simply eliminating your debts can sometimes be the best way to start over and rebuild your financial health, but only a professional can guide you in this process.
A personal bankruptcy will impact your credit file for a minimum of 6 years (7 years in some provinces) and will limit your future borrowing possibilities.


Bad Credit Debt Consolidation – Frequently Asked Questions

What impact does debt consolidation have on your credit rating?
As with any loan, a debt consolidation loan does not negatively affect your credit rating if you pay your installments on time, however past delays will remain on your record. 

When to consolidate your debts?

Consolidate your debts before it’s too late! If you feel overwhelmed by your various loans and credit cards, and you can no longer meet your obligations, it is essential to establish a realistic budget.
Indeed, if you are not able to meet your deadlines, the unpaid debts will have a negative impact on your credit rating. A financial institution takes into consideration the history of your situation as well as the different factors that led you to the impasse (what has changed in your life, your management, each case is different).
If you have the ability to make an effort over a period of time and get your management in order, it is possible that this can be taken into consideration. To do so, you will have to demonstrate that you can regain control and that you have the means to honor your commitments.

What types of debt can I pay off with a debt consolidation loan?

In Canada, all unsecured debts are eligible for debt consolidation. For example, credit card debt, utility bills, personal lines of credit are eligible for debt consolidation. Secured loans such as mortgages are not. 

Do I need collateral to get a debt consolidation loan?

It is not necessary to provide a guarantee to access a debt consolidation loan. However, if you have a low credit rating, offering a guarantee or having a co-signer will help improve the rate offered by financial institutions. 

I am unemployed, can I get a debt consolidation loan?

Like any loan, a debt consolidation loan must be repaid. If you have no fixed income, banks will be reluctant to give you a debt consolidation loan. 

How long does it take to get a loan consolidation with bad credit?

Putting aside the time of personal research, to look for the consolidation loan in the best conditions, the time from the filing of your application can vary between 5 and 7 weeks.

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