Debt consolidation is a way to combine multiple debts into one new loan or debt relief program with only one monthly payment. It can help reduce the number of bills you have to pay, accelerate debt repayment and save you money on interest. But debt consolidation loans often require good credit and can sometimes put you deeper into debt. There are other consolidation options that don't involve loans.
There are numerous forms of debt consolidation, but they generally fall into two categories: consolidation through a loan & consolidation through a debt relief program. Our debt professionals and Licensed Insolvency Trustees (LITs) will explain a range of debt solutions based on your own financial situation.
Here are the four main strategies for reducing debt:
If you are no longer able to pay your debts, a consumer proposal can be filed that usually has you repaying only a portion of the debt you owe. Only an LIT, as an Officer of the Court, can administer this debt solution.
If high interest debt is your biggest problem we can help you decide if consolidation is a viable solution.
A debt management plan or debt management program (DMP) is a voluntary agreement between you and your creditors to reduce your debt payments. This is typically conducted through a credit counselling agency.
Unlike a DMP with a not-for-profit credit counsellor, a debt settlement plan involves a debt settlement company negotiating with your creditors to try and settle each of your debts for less than what you owe.
Add up your debt from all sources (including credit cards, lines of credit, loans, etc.) and enter the total amounts below. Click 'Submit' to see how different solutions can affect your monthly payments and the total cost of repayment over the span of 5 years.
In the example below, a woman named Mary is carrying $25,000 in credit card debt. She files a consumer proposal, and an LIT negotiates with her creditors so that she only has to repay a portion of her debt (60% in this example), over a period of five years.
| Debt solution | Monthly payment | Terms |
|---|---|---|
| Mary's consumer proposal | $250.00 | Pay back 60% of the original amount owed over 5 years |
| Credit counselling | $458.88 | Pay debt in full with no interest, plus a "fair share fee" equal to 10% of the debt |
| Debt consolidation loan | $734.67 | Pay debt in full at 12% interest, compounded annually |
| Do-it-yourself budgeting | $994.34 | Pay debt in full at 19% interest, compounded annually |
Compared to other forms of debt relief, the consumer proposal is often the most cost efficient but must be considered carefully with the guidance of an LIT.
From debt consultants to debt coaches or credit counsellors to LITs, they are not all the same and they don’t help in the same way.
At BDO, our debt professionals and LITs offer a free initial consultation that provides you with an overall assessment of your financial situation and outlines all your available debt relief options. An LIT will review your finances and debts, explain all of your options and prepare you to make an informed decision on the best course of action. If their services don’t match your needs, they can also refer you to other trusted service providers.
An important first step to take when struggling to pay off a credit card balance or pay back a loan is to learn more about your debt relief options. At first you may think the best solution is to simply buckle down and work to pay off all your outstanding debts in full, but that isn’t always the case. A consumer proposal or debt consolidation may actually be a better option for you, your family and even your creditors.
Read more about when to consider a consumer proposal vs debt consolidation here.
Talking about debt can be intimidating, so we ensure you feel supported every step of the way.
We take the time to explore all debt relief options, so you can choose the best one for you.
With 120+ offices and 60+ years of experience, we're ready to help in your local community.
Talking about money can be uncomfortable & intimidating, which is often enough to prevent you from getting the help you need.
At BDO, we believe that judgement-free, compassionate support goes a long way to making that first step just a little bit easier. We know that debt problems can happen to anyone and there's no shame in seeking help.
Find your local office
