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Unsecured Debt Consolidation Loans

Move your debts into a single place and make monthly repayments with better interest rates and loan terms.

Name Product Interest Rate Loan Amount Loan Term Fees Credit Score Link
Mogo Personal Loan
5.90% - 46.96%
$200 - $35,000
6 - 60 months
NSF fee - $20 - $50
Min. credit score: 540
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An online lender who aims for a hassle-free process through same-day unsecured loan approval and funding. Get a loan fast and track your credit score for free.
Loans Canada Debt Consolidation Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
$300 - $50,000
3 - 60 months
No application or origination fees
Min. credit score: 300
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LoanConnect Debt Consolidation Loan
5.99% - 47.42%
$500 - $35,000
12 - 60 months
No application or origination fees
Min. credit score: 300
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More Info
LoanConnect is an online broker that matches borrowers to lenders offering debt consolidation loans in amounts up to $35,000. Get approved for multiple loan offers from different lenders, no matter your credit score.
Fairstone Debt Consolidation Loan
19.99% - 39.99%. Varies by loan type and province
$500 - $50,000
6 - 120 months
None
Min. credit score: 560
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Consolidate your debt up to $20,000 for an unsecured loan and $50,000 for a secured loan.
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Consolidating your debt into one place can help you simplify your loan repayments and ideally score a lower interest rate and better loan terms. Debt consolidation can help you pay down your debt faster and cheaper.

While there are many different ways to consolidate debt, including using a balance transfer credit card, a home equity line of credit or a secured personal loan, those who have a large amount of debt and don’t want to risk losing an asset in order to take out a loan may want to consider an unsecured debt consolidation loan.

How does an unsecured debt consolidation loan work?

A debt consolidation loan can be used to combine all of your debt into one place, where you’ll only have to make one single monthly repayment. The purpose of consolidating your debt into one place is ideally to get a more competitive interest rate and more favourable loan terms, which means over the course of carrying your debt, you could possibly pay it off cheaper and faster.

An unsecured debt consolidation loan does not require you to secure your loan with any collateral. While it’s less risky for you as a borrower since you don’t stand to lose your home, vehicle or other asset, an unsecured personal loan is riskier for the lender and they typically manage that risk by charging a higher interest rate. If you’re certain that you can payoff your loan and you’d like to get a lower interest rate, you may want to consider a secured personal loan.

Some lenders may offer different features such as choosing between a fixed or a variable interest rate, or selecting a secured or an unsecured loan. Consider your own personal financial situation before you decide which features may be best suited for you.

How to compare unsecured debt consolidation loans

Consider the following factors when comparing your loan options:

  • APR. The annual percentage rate (APR) will tell you the true cost of your loan as it takes into account the interest rate and any fees you will pay on your loan. Comparing the APR’s of different loans is better than comparing interest rates and fees separately, as it’ll help you find the best loan deal based on the true cost.
  • Origination fees. While the APR will likely include any origination fees that you must pay, it is a good idea to look at this fee separately as well. Some lenders will not charge an origination fee, while others may charge a fee of 1-5% of your total loan amount.
  • Type of interest rate. Some lenders will allow you to choose between a fixed interest rate and a variable interest rate. Both have their own pros and cons. For example, if you’re looking to budget in your exact monthly repayments, you may want to stick with a fixed-rate, while variable-rates can start out lower but increase over time.
  • Type of loan. Secured and unsecured personal loans are typically offered by lenders. While secured loans often come with more competitive interest rates, you risk losing your collateral if you fail to pay back your loan.
  • Loan term. Loan terms typically sit between one and five years, with some extending as high as seven. Consider the amount of debt that you’re looking to consolidate and choose the shortest loan term that you can manage. A shorter loan term will result in paying less interest and therefore cutting the cost of your debt.
  • Loan amounts. Many lenders set minimum and maximum loan amounts. Consider the total amount of debt that you have and find out if it’s enough, but not too much, to meet a lenders minimum and maximum borrowing amounts.
  • Eligibility requirements. Before applying for a loan, make sure you meet the eligibility requirements. While it varies between different lenders, the basic criteria such as age, residency and income minimums usually applies to most loans.
  • Repayment flexibility. Find out if you’re able to payoff your loan early without facing any additional penalties. In addition, you’ll want to make sure you can make your loan repayments directly from your bank account without incurring any additional fees.

Things to avoid with unsecured debt consolidation loans

Before comparing unsecured personal loans to consolidate your debt, consider the following:

  • Origination fees. Some debt consolidation loans come with a one-time origination fee of between 1-5% of your total debt amount. If you have a large sum of debt, this can add a hefty fee onto your already existing debt, so make sure you’re aware of any fees before you apply for a loan.
  • Unfavourable rates or terms. The idea of consolidating your debt into one single unsecured personal loan is to pay less money in interest and fees and focus on paying off your debt faster. If a lender is offering you a higher interest rate than you’re currently paying or you will face costly fees, consider if it’s actually worth consolidating your debt.
  • Being dishonest about what you need the funds for. If a lender does not allow you to consolidate debt using a personal loan, look elsewhere for a loan. It’s important to always be honest with a lender about what you need the loan funds for.
  • Getting into more debt. Apply for a loan that covers your current debt amount only. If you decide to apply for a higher sum, you could find yourself getting into more debt or spending money on unnecessary expenses or items. With a debt consolidation loan, you’ll want to focus on paying down your debt only.
  • Applying with an untrustworthy lender. There are plenty of untrustworthy lenders in the loan space. With regulations and restrictions across the different provinces and territories, you’ll want to make sure the lender you choose is legitimate and abides by any laws.

Bottom line

If you have a large amount of debt and you need a longer period of time to pay it down, you may want to consider looking into an unsecured debt consolidation loan. With lenders offering competitive rates and loan terms, you could find yourself paying down your debt much faster and cheaper than you currently are.

Before you apply for an unsecured debt consolidation loan, consider comparing your other options to consolidate debt. If you’ve decided to pursue a personal loan to help you pay down your debt, learn more about unsecured personal loans in our guide.

Frequently asked questions

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