Debt Consolidation in Canada: How to Get Out of Debt Faster

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Five bills, five due dates and interest eating most of every payment. That is how debt starts to feel out of control.

Debt consolidation in Canada can mean anything from one lower-rate loan to a legal deal with your creditors. This guide goes from the lightest option to the most serious.

Quick answer: If your credit is still fair, a consolidation loan or balance transfer at a lower rate is the simplest fix. If you can’t get a lower rate, talk to a not-for-profit credit counsellor about a debt management plan, where you usually repay 100% but interest may be cut. If your unsecured debt is too big to repay, a Licensed Insolvency Trustee can file a consumer proposal, a legal deal that can cut what you owe and lasts at most five years. Only Licensed Insolvency Trustees can file one.

Updated on September 23, 2026 · Sources: FCAC, Office of the Superintendent of Bankruptcy, Credit Counselling Canada, Fairstone, easyfinancial

Key takeaways

Consolidation only helps if the new rate is lower. FCAC warns a higher rate will likely increase your debt.
A longer repayment period can cost more in interest overall.
A consumer proposal is a legal process; a debt management plan is a voluntary agreement.
Only Licensed Insolvency Trustees can file consumer proposals or bankruptcies.

Your options at a glance

Option	Best for	What you repay
Consolidation loan	Fair credit, steady income	100%, ideally at lower interest
Debt management plan	Can repay, need interest relief	Usually 100%, sometimes without interest
Consumer proposal	Unsecured debts too large to repay	An agreed share, over up to 5 years

Based on FCAC and Office of the Superintendent of Bankruptcy pages, checked September 2026.

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How to consolidate debt, step by step

List every debt and its rate
Check your credit report
Try the cheapest fixes first
Compare consolidation loans
Talk to a not-for-profit credit counsellor
Meet a Licensed Insolvency Trustee if debt is unmanageable

Step 1. List every debt and its rate

Write down each balance, interest rate and minimum payment. Add a simple monthly budget. FCAC says this is how you spot which debts to consolidate.

Step 2. Check your credit report

Your credit history drives the rate you’ll be offered. Order your Equifax and TransUnion reports; our guide to checking your credit score for free shows how.

Step 3. Try the cheapest fixes first

Call your card issuers and ask for a lower rate. A low-interest or balance transfer card may offer a promotional rate, usually for 6 to 18 months, according to FCAC. There is usually a transfer fee, and you can lose the promo rate if you miss a payment.

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Step 4. Compare consolidation loans

A personal loan, a debt consolidation loan or a line of credit can replace several bills with one payment. Homeowners can also borrow against home equity; our guide to HELOCs in Canada explains the trade-offs. FCAC reminds you that applying with several lenders in a short time may lower your score.

Step 5. Talk to a not-for-profit credit counsellor

A credit counsellor can set up a debt management plan (DMP): one monthly payment to the agency, which pays your creditors. FCAC says creditors may agree to reduce or drop interest, but you usually repay 100% of the debt, and creditors aren’t legally required to stop collection. DMP fees aren’t regulated, so ask first.

Step 6. Meet a Licensed Insolvency Trustee if debt is unmanageable

A consumer proposal is a legal offer to pay creditors part of what you owe, or more time, or both. The Office of the Superintendent of Bankruptcy sets the key rules:

open to individuals with total debts up to $250,000, not counting a mortgage on your home;
the term can’t exceed five years;
once filed, wage garnishments and lawsuits by unsecured creditors are stopped;
creditors have 45 days to accept or reject;
you attend two counselling sessions.

Fees for a consumer proposal are regulated by the Bankruptcy and Insolvency Act and are paid from your payments to the trustee. Trustees may offer a free first consultation.

Common mistakes

Consolidating at a higher rate than you pay now.
Running the cards back up after paying them off.
Stretching the term so far that total interest goes up.
Missing payments on a consumer proposal: three missed monthly payments annul it.
Paying an unlicensed “debt relief” firm.

Beware of debt relief scams

The Office of the Superintendent of Bankruptcy warns that unregulated debt advisors charge hundreds or thousands of dollars for services they aren’t licensed to provide. Red flags:

promises to erase your debt before looking at your finances;
fees up front, or “referral” and “administration” fees;
telling you to stop talking to or paying your creditors;
online-only service with no Canadian address.

You don’t need a referral to see a trustee. Our guide to fraud and scams in Canada covers how to report one.

Tools and offers that help

1. Fairstone (consolidation loan)

An alternative lender for people who don’t meet bank criteria.

Unsecured: $500 to $25,000 over 6 to 60 months at 29.99% to 34.99%, as of September 2026.
Secured (homeowners): $5,000 to $60,000 over 36 to 120 months, from 19.99%.

Soft-check quote and no prepayment penalty on unsecured loans.
Only worth it if your current debts cost more than these rates.

2. easyfinancial (consolidation loan)

Amount and term: $500 to $20,000 over 9 to 84 months.
Rate: starting from 29.99%, as of September 2026; 2% lower with a co-applicant.

Branches across Canada and no prepayment penalty.
Rarely cheaper than a bank loan or a card promo.

3. Credit Counselling Canada

A national association of accredited, not-for-profit credit counselling agencies, listed by FCAC. Use its locator to find a counsellor near you. Ask about fees before you sign a DMP.

4. Consumer proposal through a Licensed Insolvency Trustee

Find a trustee in the Office of the Superintendent of Bankruptcy’s directory of Licensed Insolvency Trustees. Equifax removes a consumer proposal from your report 3 years after you complete it; TransUnion after 3 years from completion or 6 years from signing, whichever is sooner.

Checklist: choose your path

New rate lower than your current average rate? A consolidation loan may work.
Can repay in full but interest is crushing you? See a credit counsellor.
Can’t repay unsecured debts even over five years? Meet a trustee.
Close or freeze the cards you consolidate.
Never pay a debt firm up front.

How we compared these options

Sources: FCAC, the Office of the Superintendent of Bankruptcy and each provider’s official page, checked on September 23, 2026 for every offer.
Criteria: cost, how much debt you repay, credit impact and legal protection.
Order: not a ranking; options go from the lightest to the most serious.
Independence: no provider paid for placement.

Not financial advice. Rates and terms checked on September 23, 2026 with each provider’s official page; confirm before applying.

FAQ

Does debt consolidation hurt your credit score?

Applying adds a hard inquiry. Over time, on-time payments and fewer high balances can help, FCAC says. A DMP shows on your report for 2 years after you finish, per the Office of the Superintendent of Bankruptcy.

What is the difference between a consumer proposal and bankruptcy?

In a proposal you keep your assets and pay an agreed amount. In bankruptcy, non-exempt assets go toward your debts. Both are filed only by a Licensed Insolvency Trustee.

Can I consolidate debt with bad credit?

Sometimes, but the rate may be higher than what you pay now. In that case, credit counselling or a proposal usually makes more sense.

Is credit counselling free?

FCAC says no reputable agency charges for the first meeting. DMPs can carry set-up and monthly fees.

For the full picture, see our hub Best Personal Loans in Canada 2026, our list of the best personal loans in Canada and our guide to loans for bad credit in Canada.

Sources

Ieveera SEO is an independent publisher, not a bank or financial advisor; content is for information only and may include paid affiliate links that never affect our rankings — always confirm current rates and terms with the provider. Rates shown in CAD; verify with the issuer.