What Is Debt Consolidation?

Debt consolidation combines multiple debts (credit cards, personal loans) into one loan at a lower interest rate. A $15,000 debt spread across 3 credit cards at 20% APR costs ~$3,000/year in interest. One consolidation loan at 10% APR costs only $1,500/year — saving $1,500 immediately.

Consolidation Methods in Canada

• Personal consolidation loan: Unsecured, 8-15% APR, fixed payments (best for credit cards)
• HELOC or home equity loan: Secured by your home, 7-10% APR (best rates, lowest risk)
• Balance transfer: 0% APR for 6-12 months + 1-3% fee (best short-term)
• Debt management plan: Non-profit agency negotiates lower payments with creditors

Avoid Extending the Timeline

Consolidating reduces monthly payments but can extend repayment — paying $300/month for 5 years instead of 3 years means significantly more total interest, even at a lower rate.