Debt Consolidation Loans in Alberta

The main difference between good and bad debt is how debt affects your overall net worth. Some forms of debt can be treated like an investment and help increase your net worth over time. Likewise, if debt has a reliable future value, it would also be considered good debt. 

If, however, you accumulate debt for items that lose significant value over time and don’t build up your net worth, that kind of debt would be bad debt. 

People are quick to denounce debt and it tends to surprise people to learn that not all debt is bad. It’s important to understand the difference between good and bad debt so you can properly manage your personal finances. 

In Alberta, some examples of good debt include:

• A mortgage: This is good debt because a home is an asset that usually goes up in value over time and will help increase your net worth.

• A line of credit: This is often considered good debt because a line of credit tends to have lower, more manageable interest rates, and the money is frequently used to improve an asset like a home.  

• A student or personal loan: Money that is used for higher education or to take courses to help improve your skills and chances of getting a better job is considered good debt. 

• A debt consolidation loan: This is also good debt because, if managed correctly, it can improve your credit score and help get you out of debt faster.

• Borrowing money to invest in an RRSP or TFSA for retirement or an emergency fund can also potentially be good debt, depending on your financial circumstances and whether you manage the debt payments responsibly. 

In Alberta, some examples of bad debt may include:

• Payday loans: If not managed responsibly a payday loan can turn into bad debt because of sky-high interest rates and the likelihood they will increase rather than alleviate your overall debt. 

• Credit card debt: This is also considered bad debt because of the high interest rates and how quickly and easily debt can accumulate on credit cards and impact your credit score.

While debt consolidation is often a good idea, unfortunately, in Alberta (and in much of Canada), not all forms of debt can be consolidated. Types of debt that you can consolidate include:

• Credit card debt 

• Unsecured personal loans 

• Student loans not overseen by the provincial or federal government

Forms of debt you cannot consolidate include: 

• Mortgages

• Government student loans

• Car loans or RV loans

• Back taxes owed to the Canada Revenue Agency

In Alberta, there are numerous types of debt consolidation options available. Two common options available are secured and unsecured loans.

You can get a secured loan, which is when you use an asset (like a house) to guarantee that you will repay your loan. Because repayment is guaranteed, secured loans tend to have lower interest rates, however, the big drawback is that you risk losing a major asset like a house or car if you can’t repay the loan. 

With an unsecured loan, you don’t need an asset to act as collateral. However, because repayment of the loan is not guaranteed (i.e. it is unsecured) these kinds of loans have higher interest rates. This can be a good option if you have a low credit score.

Another common type of debt consolidation loan is a guarantor loan. When getting this type of loan (popular with those who have poor financial health and a low credit score) you would need to get a family member or friend to co-sign the debt consolidation loan. If you are unable to make payments, your consignor is then responsible for your monthly payment. This can be a huge burden to place on someone and these loans often come with a very high interest rate and thus are best avoided if possible.

Every financial lender has different qualification requirements when it comes to applying for a debt consolidation loan. Generally, you should aim to have a yearly income of at least $20,000, a credit score of 660 or higher, and a credit history that goes back at least 12 months. Some loan companies in Alberta may also require that you’ve never gone through a debt settlement process that involved declaring bankruptcy or a consumer proposal.  

If your credit score is below 660, there may still be debt consolidation loan options available. Sign up for Borrowell to see what loan options are available based on your credit score.

If you’re ready for some debt relief, don’t be intimidated by the loan application process. Generally, companies that provide loans for debt settlement have an online application process that is easy and fast and takes under 10 minutes. 

You’ll likely need to provide information about things like income, your address, your citizenship, and your age. You will also need to provide your SIN number, as well as financial information like a bank account number.

If you’re not sure where to start, you can compare lenders online with a platform like Borrowell. Sign up for free and easily compare debt consolidation loan options from trusted lenders in Alberta. You can compare interest rates, term lengths, and more while seeing your likelihood of approval based on your free credit score. This will help you find the best lender and debt consolidation loan option that matches your credit profile.

When used properly, a debt consolidation loan is a great option for improving your credit score. Your credit score is made up of a variety of factors, including:

• Repayment history 

• Credit utilization 

• Credit history 

• Credit mix 

• Credit inquiries 

As long as you make on-time payments towards your loan (and ensure your loan provider reports your payments to a credit monitoring bureau), you can build up your repayment history and increase your credit score.

A consolidation loan can provide much needed debt relief and be an important step on the way to debt settlement. Consolidation loans can improve your financial health by saving you thousands of dollars on interest because you can get a better interest rate, which can also help you get out of debt faster. If you manage the loan payments responsibly, a debt consolidation loan can also help improve your credit score. It’s also much easier to manage one single loan payment each month than trying to juggle multiple payments for different loans.

If you’re looking for debt relief because you are finding it hard to manage your current debt load and you are serious about making loan payments on time, then a debt consolidation loan is for you. 

Furthermore, a good credit score is crucial for financial health and a consolidation loan can also help boost your credit score. Before taking out a loan, however, you need to be honest with yourself about how disciplined you can be with managing a monthly payment. A loan can be a disaster and damage your credit score if you don’t make payments and can’t manage the financial responsibility of a loan.

When looking for a debt consolidation loan in Alberta, look for a reputable financial company that is upfront about its interest rates and fees. You want to work with a company who truly understands the importance of debt relief.

With Borrowell, you can sign up for free to compare interest rates from trusted lenders in Alberta and the rest of Canada.

In Alberta, every loan provider will have a different range of amounts that they will allow you to borrow. In general, amounts you’ll receive vary by loan company and the quality of your credit score but you can expect amounts to be anywhere from $1,000 to $30,000.