If you’re struggling to repay multiple debts, a debt consolidation loan lets you combine them into one loan with a single monthly repayment. This makes it easier to manage repayments and can also reduce the interest you pay.
If you’re searching for debt consolidation solutions in Winnipeg, keep reading for tips on finding the right loan for your needs.
Compare debt consolidation loans in Winnipeg
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What are the interest rates of debt consolidation loans in Winnipeg?
Debt consolidation loan interest rates in Winnipeg typically range from 6.99% to 32%.
There are several factors that affect the interest rate on your debt consolidation loan, including the following:
Your credit score. If you’ve got a high credit score, you’ll be able to access significantly lower rates than borrowers with bad credit.
Your income. Lenders look for borrowers with a steady source of income. You may also be able to access better rates if you’ve been in steady employment for a long time.
Your debt-to-income ratio.Debt-to-income ratio (DTI) reflects the percentage of your income that goes towards your debt repayments each month. A lower ratio will help you get a better rate.
Secured or unsecured. You’ll get a better rate if you offer an asset (such as your car) as collateral. However, the asset could be repossessed if you default on the loan.
How to get a debt consolidation loan in Winnipeg
Compare lenders. Start by researching debt consolidation lenders and the loans they offer. Consider eligibility criteria as well as the annual percentage rate of the loan, the loan amount and the terms available. Of course, make sure you’re dealing with a legitimate lender that is properly registered to operate in Manitoba.
Get pre-approved. If you’re pre-approved for a loan, you can use this “quote” to compare the cost of the loan with other debt consolidation loans.
Submit your documents. Now it’s time to submit a full application for the loan. Provide your contact details, proof of ID and proof of income and employment.
Review loan offer. Once you’ve been given full approval, take some time to carefully review all details of the loan contract before you sign.
Get funded. Get the money you need to consolidate your debts.
Am I eligible for a debt consolidation loan in Winnipeg?
Eligibility requirements for debt consolidation loans in Winnipeg vary between lenders. However, you will need to meet the following criteria:
Be 18 years of age or older.
Be a Canadian citizen or permanent resident.
Have a steady source of income.
Have a good credit score.
However, there are some online and alternative lenders that specialize in loans for borrowers with bad credit, so it’s worth researching what’s available. Just watch out for high interest rates and fees.
Pros and cons of debt consolidation
Pros
Easier to manage loan repayments. Rather than managing several monthly debt repayments, you only need to make one monthly payment.
Save on interest. If you can find a debt consolidation loan with a lower interest rate, you’ll pay less interest to get out of debt.
Get out of debt sooner. With a lower rate, you’ll be able to pay back the money you owe at a faster rate and get your finances back on track.
Improve your credit score. Making on-time payments and paying off a debt consolidation loan on schedule can help boost your credit score.
Cons
Watch out for fees. From origination fees to early repayment penalties, fees can increase the total cost of your loan.
A higher interest rate may apply. Make sure your loan doesn’t come with a higher rate than the interest rate that applies to your existing debts.
High rates for bad credit. While there are debt consolidation loans available for bad-credit borrowers, you’ll need to accept high interest rates – which can make it even tougher to get out of debt.
What are the monthly payments of debt consolidation loans?
To give you an idea of how much it’ll cost to pay off your debt consolidation loan, let’s look at the example of a $10,000 loan with an APR of 7.99% vs 10.99%, and a loan term of three or five years.
As you can see in the table below, a higher rate and longer loan term can have a big impact on the total cost of borrowing. With a 10.99% APR and a five-year term, it’ll cost you a whopping $1,763 extra compared to a 7.99% APR and a three-year term.
$10,000 at 7.99% over 3 years
$10,000 at 7.99% over 5 years
$10,000 at 10.99% over 3 years
$10,000 at 10.99% over 5 years
Monthly repayment
$313
$203
$327
$217
Total cost
$11,279
$12,163
$11,784
$13,042
Additional cost compared to the cheapest option
–
$884
$505
$1,763
Other ways to consolidate debt in Winnipeg
If a debt consolidation loan isn’t the best choice for you, consider these other options:
Balance transfer credit card. A balance transfer credit card allows you to transfer your existing credit card debt to a new card that offers no or low interest for an introductory period. However, you’ll need to be aware that a balance transfer fee applies, while the card will also have a much higher revert rate once the intro period ends.
Line of credit.A line of credit is a loan with a set limit. You can withdraw funds up to the maximum limit whenever you need them, and interest is charged on the money you borrow rather than on the entire credit limit. Just watch out for any fees that apply and the impact of rising interest rates.
Debt management program. Debt management plans are available from credit counselling agencies. When you sign up to a plan, the agency negotiates with your creditors on your behalf in an effort to consolidate all your debts into one monthly payment with a reduced interest rate. You can then repay what you owe over a period of up to five years.
Debt settlement. Debt settlement is available through debt relief companies and some credit counselling agencies. If you choose this option, the debt relief company or counsellor negotiates a payment amount with your creditors to settle your debt. You typically pay this amount off in monthly installments and while it’s smaller than the amount you owe, be aware that the debt relief company will charge a fee.
Consumer proposal. A consumer proposal is a legal agreement that you can put to your creditors as a way of settling your debt. You can offer to pay back a percentage of the money you owe, negotiate a longer repayment term, or both.
How will debt consolidation in Winnipeg affect my credit?
Initially, taking out a debt consolidation loan will cause your credit score to dip. This is because the lender will request a hard credit enquiry on your credit report.
However, in the long run, a debt consolidation loan can help you improve your credit score. Your payment history is an important factor in determining your score, so provided you make payments on time, your credit score will gradually rise. Debt consolidation can also help increase your credit score by lowering your credit utilization ratio.
Other debt consolidation options can have a more serious impact on your credit score. Entering into a debt management plan, debt settlement or consumer proposal will push your credit score down and stay on your credit report for three years.
Frequently asked questions
There are multiple options available. The most common approach is to take out a debt consolidation loan, but you can also consider opening a line of credit or applying for a balance transfer credit card. More serious options include entering into a debt management program, debt settlement or a consumer proposal.
You can consolidate a wide range of unsecured debts, such as the following:
Credit cards
Personal loans
Lines of credit
Utility bills
Payday loans
A credit counsellor can assess your financial situation and help you decide on the best way to get your debt under control. They can also provide general financial education to help you stay out of debt in the future.
Debt consolidation loans are available from banks, credit unions, online lenders and peer-to-peer lenders. However, you can also access debt consolidation solutions through a debt relief agency or credit counselling service.
Tim Falk is a freelance writer for Finder. Over the course of his 15-year writing career, he has reported on a wide range of personal finance topics. Whether you're investing in stocks and ETFs, comparing savings accounts or choosing a credit card, Tim wants to make it easier for you to understand. When he’s not staring at his computer, you can usually find him exploring the great outdoors.
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