Debt consolidation loans in Alberta: Rates from 8.99%

Types of debt consolidation in Alberta

1. Unsecured debt consolidation loans
2. Secured debt consolidation loans
3. Balance transfer credit card
4. Consumer proposal
5. Orderly Payment of Debts
6. Debt settlement
7. Debt management program

1. Unsecured debt consolidation loans in Alberta

Unsecured debt consolidation loans rely entirely on your credit score to determine your eligibility. Borrow up to $50,000 without the need for collateral or a cosigner. Just be aware that you’ll pay higher interest rates when you apply with bad credit.

• Who’s it best for? It’s best for people with good credit who don’t have an asset to secure their debt.
• When should I avoid it? Avoid it if you have bad credit or you want to get lower interest rates by securing your loan with collateral.
• How much is it? You’ll pay 9.75%–35% based on your credit score. You could also pay origination fees, late/NSF fees or prepayment fees, depending on your lender.

2. Secured debt consolidation loans

These loans rely less on your credit score. Instead, you’ll use an asset such as your home or vehicle to secure your loan. This will give you lower interest rates than unsecured loans, but you may be required to give up your asset if you default on the loan.

• Who’s it best for? It’s best for people with good or bad credit who own a valuable asset.
• When should I avoid it? Steer clear of these loans if you don’t own any assets or if you’re concerned you might struggle to make your repayments.
• How much is it? It starts at 6.99%. You could also owe origination fees, prepayment fees or late/NSF fees.

3. Balance transfer credit card

Balance transfer cards let you consolidate your credit card debt at a lower interest rate. These cards often come with a low promo offer (typically between 0 and 3.5%). Rates increase after 6–10 months, so it’s best to pay your balance down quickly once you transfer funds.

• Who’s it best for? It’s best for people dealing exclusively with credit card debt.
• When should I avoid it? Consider another option if you don’t want to pay balance transfer fees, or you don’t think you can pay your balance off during the promo period.
• How much is it? Many cards offer a promo interest rate between 0% and 3.5%. When your rates increase after the promo, you’ll pay between 8.99% and 19.99%. You’ll also pay balance transfer fees between 1% and 3% of the amount transferred.

4. Consumer proposal

Consumer proposals are formal agreements negotiated on your behalf by a Licensed Insolvency Trustee (LIT). Your LIT will negotiate with your creditors to try to reduce your payments or extend the time you have to pay your debts (or both). These agreements cannot include secured debts like a mortgage or auto loan.

• Who’s it best for? It’s best for people with bad credit who don’t qualify for debt consolidation financing.
• When should I avoid it? Think about something else if you don’t want your credit score to go down or if you need to consolidate your secured debts.
• How much is it? Consultations are free, but you could be on the hook to pay thousands of dollars in fees to set up your debt agreement, depending on how much you owe.

Sample of companies that help with consumer proposals in Alberta

Consultations are free. However, you’ll need to pay fees if you decide to go with their services.

5. Orderly Payment of Debts

Orderly Payment of Debts (OPD) is a debt repayment arrangement that’s available in Alberta only through Money Mentors. You apply to the court for an order to consolidate your unsecured debt into one monthly payment with an interest rate of 5% and a repayment period of up to five years.

• Who’s it best for? It’s best for people looking for a low fixed interest rate.
• When should I avoid it? Steer clear if you don’t want your credit score to go down or if you need to consolidate secured debts, such as your house or car loan.
• How much is it? In addition to the interest rate, you may be charged a fee to administer the program.

6. Debt settlement

A licensed insolvency trustee can help you negotiate with your creditors to reduce your debt without claiming bankruptcy. You won’t have to pay off all the money you owe, and your monthly payments will usually be lower. However, debt settlement will significantly decrease your credit score.

• Who’s it best for? It’s best for people who can’t afford their debt and want to stop punitive action by creditors.
• When should I avoid it? Think about something else if you don’t want your credit score to go down, or you don’t want to pay high fees.
• How much is it? Consultations are free, but you may need to pay thousands of dollars in fees to set up your debt agreement, depending on how much you owe.

Sample of organizations that help with debt settlement in Alberta

7. Debt management program

Debt management programs are provided by non-profit credit counselling firms and for-profit debt management firms. These organizations negotiate with your creditors to help reduce your interest rates. Unlike debt settlement programs, you’ll still repay everything you owe, but your payments should be more affordable.

• Who’s it best for? It’s best for people who have the money to repay their debts but want to reduce their monthly payments or interest rates.
• When should I avoid it? Consider another option if you can’t afford your monthly payments or you need to consolidate secured debts.
• How much is it? Free with a credit counselling firm in most cases, though you may pay for lawyers or other services. You’ll typically pay a set-up fee and a monthly maintenance fee with a for-profit firm.

Sample of organizations that help with debt management in Alberta

These programs are usually non-profit, but you may have to pay fees for certain services.

How do debt consolidation loans work?

The main benefit of debt consolidation loans is that you can combine all of your debts into one place. Basically, you take out one big, low-interest loan, which you use to pay off all of your other debts. You then only have one large debt repayment to make instead of multiple small ones. In general, you’ll have to pay back a debt consolidation loan in monthly installments over a set term, such as five years.

How to compare debt consolidation loans in Alberta

There are many ways to compare debt consolidation loans to make sure you’re getting the best deal. Look for the following factors when choosing a lender:

• Low interest rates. Look for the lowest interest rates possible and make sure that they fall below the rates on all of your individual debts. Learn more about low interest loans.
• Longer term. If you’re struggling to make your payments every month, aim for a longer term with smaller monthly payments. Keep in mind that you’ll pay more in interest the longer your loan term is.
• Low minimum credit score. Before you apply for a debt consolidation loan, you should find out what your credit score needs to be to qualify.
• No fees. Some lenders will bury hidden fees and charges in your contract, so make sure to read the fine print thoroughly.

How can I apply for a debt consolidation loan?

Once you’ve found a debt consolidation lender in Alberta that you feel comfortable with and are ready to start your application, you’ll need to follow a few simple steps:

1. Fill out your application. You’ll need to supply your personal and banking info through an online or in-person application.
2. Verify your ID and income. Bring or send in documents to show proof of income (pay stubs, tax returns, etc.) and proof of identity (licence or passport).
3. Apply for loans selectively. Avoid applying for several loans at once, since your credit score will go down every time a lender checks your credit.

What types of debt can I consolidate in Alberta?

Understanding which types of debt you can consolidate in Alberta is the first step toward deciding which options you might want to consider, if any at all. People generally consolidate the following kinds of debts:

• Credit card debt

  If you have more than one credit card, you’ll have to keep track of the debts you have on each one and pay off a number of different balances each month, which can be frustrating and overwhelming. Many credit cards also charge noticeably high APRs, meaning you pay unnecessarily high interest on your debt.

• Personal loans

  If you have multiple personal loans, you can think about bringing them under a single loan. Depending on your existing financial situation and credit score, you may qualify for a more competitive interest rate on a debt consolidation loan.

• Student loans

  You can consolidate your student loans into one single loan. If you have debt from university or college, you also might want to look into refinancing — it often comes with a consolidation option.

• Retail credit cards

  The discounts and rewards can be great from retailer cards. However, if you have too many, it can be difficult to keep track of what you owe and which payments to prioritize.

• Line of credit

  Reduce the amount you owe on multiple lines of credit by paying them off with a fixed-term loan.

• Tax debt

  If you owe taxes to the CRA from previous years or can’t afford to pay for this year, you can consider taking out a personal loan to pay them off instead of taking on an installment agreement. Loans tend to have more flexible terms than installment agreements, and if you have good credit, interest could be a lot more affordable.

Strategies Albertans can use to take control of debt on their own

If you’re not ready for debt relief and can’t qualify for a debt consolidation loan, you have a few strategies to reduce your debt more quickly.

1. Try to negotiate with creditors yourself. Ask your creditors to reduce your interest rate or your principal or to extend your loan term. Be firm about what you can afford each month, and escalate the call until you reach somebody who can help.
2. Use a trusted method for debt repayment. Use a trusted method, such as the avalanche or snowball method, for debt repayment to strategically pay off debts quickly.
   • The avalanche method. With this method, you start by paying off debts with the highest interest first. If you don’t know which debt has the highest interest, check your financial statements to see what interest rates you’re being charged on each of your debts.
   • The snowball method. With this method, you pay off the smallest debts first. The advantage is that smaller loans won’t get a chance to grow into bigger, unmanageable loans, which simplifies your debt. However, it could cost more in the long term than if you were to use the avalanche method.

Frequently asked questions

• What are the interest rates of debt consolidation loans in Alberta?

  Interest rates for debt consolidation in Alberta typically run between 6.99% - 35%. However, some may reach as high as 35% if you have bad credit. The rates you get for your loan will depend on personal factors such as your credit score, income, debt-to-income ratio and whether you can secure your loan with an asset such as your house or vehicle.

• My loan application was refused. Is this because I have bad credit?

  Not necessarily. You should contact your lender to find out why your application was turned down. If it was due to bad credit, you can look at applying for a bad credit loan in Alberta. You may also be able to qualify for an OPD.

• Are all types of debt eligible for consolidation in Alberta?

  All types of unsecured debt (like credit cards and personal loans) are eligible for debt consolidation. You won't be able to consolidate money owed for some forms of secured debt like your mortgage, back taxes or government-issued student loans.

• Is debt consolidation in Alberta the right fit for me?

  You should only consolidate debt if you're in a position to pay back your loans. Your main purpose in consolidating should be to get all your payments into one place and to lower your interest rates. If you don't have enough money to afford your payments, then you might look at other options like debt settlement.

Written by

Leanne Escobal

Publisher

Leanne Escobal is a publisher at Finder with more than 12 years of experience in financial products and services, with a focus on content strategy and marketing. She has completed the Canadian Securities Course (CSC®) as well as the Personal Lending and Mortgages course through the Canadian Securities Institute. Leanne holds a Bachelor of Arts (Honours) in English literature and creative writing from Western University. See full bio

Leanne's expertise

Leanne has written 175 Finder guides across topics including:

• Personal Loans
• Car Loans
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• International Money Transfers
• Make Money Online

Co-written by

Claire Horwood

Associate editor

Claire Horwood was a writer at Finder, specializing in credit cards, loans and other financial products. She has a Bachelor of Arts in Gender Studies from the University of Victoria, and an Associate’s Degree in Science from Camosun College. Much of Claire’s coursework has focused on writing and statistics, with a healthy dose of social and cultural analysis mixed in for good measure. In her spare time, Claire enjoys rock climbing, travelling and drinking inordinate amounts of coffee. See full bio

Claire's expertise

Claire has written 360 Finder guides across topics including:

• Banking
• Personal Loans
• Car Loans
• Business Loans
• Credit Cards