Debt Consolidation Loans in Calgary

There are good kinds and bad kinds of debt that you should be aware of. “Good debt” can help you generate income or increase your net worth. Examples of “good debt” include:

• Education or tuition fees

• Investing in your small business or freelance career idea

• Real estate 

Debt is “bad” if you are borrowing money to purchase depreciating assets, or if the source of debt has high interest rates and you are unable to manage it properly. For example, credit card debt can accumulate quickly, and certain credit cards may have notably high interest rates.

When you are taking out a loan in Calgary, it is important to determine first the type of debt you are taking on, and how it will affect your financial situation. A debt consolidation loan - where consumers merge multiple debts into a single debt with one monthly loan payment at a set interest rate – can be considered beneficial debt if monthly payments are consistently made on time and interest rates are lower than your original loans.

The amount of debt you have and how well you manage it is one of the biggest factors that impacts your credit score. Managing your debt responsibly can help you maintain a good credit score. If you manage your debt poorly and don’t pay it back on time, your credit score will suffer.

Your credit score is made up of five main factors: 

• Payment history 

• Credit utilization (how much credit you use out of what is available) 

• Credit history 

• Credit mix

• Credit inquiries

In Calgary, as in any other large Canadian city, consumers can qualify to take out a debt consolidation loan to merge all of their outstanding debt into one loan. There is also the option of credit counselling, a process where certified counsellors help debtors with debt settlement through financial education and a debt management plan.

If you’re considering a debt consolidation loan, you can sign up for Borrowell and compare loan options that you qualify for based on your credit score. 

Consumer debt affects many residents of Calgary. As mentioned, Calgary is among the most expensive cities in Canada and many consumers find themselves paying high interest rates on credit cards and personal loans to support their lifestyle and financial obligations.

Some of the advantages of debt consolidation to consider for a resident of Calgary are:

• Paying one monthly payment and simplifying your financial situation

• The interest rate of a debt consolidation loan is often lower than other loans, allowing you to pay off debt faster

If monthly payments are made on-time, a debt consolidation loan may improve your overall credit score or credit rating

Debt consolidation loans can help consumers take care of many different types of debt, including credit card debt, unsecured lines of credit, and unsecured personal loan debts.

Secured debt, where borrowers are required to put up assets as surety or collateral, typically does not qualify. Debt amounts that creditors deem excessive may not be eligible for a debt consolidation loan; in this situation, other debt relief programs – including credit counselling programs - may be helpful.

If you are considering a debt consolidation loan and have reviewed its advantages as a debt relief option, it is important to determine if you qualify.

As mentioned, only unsecured debts can be consolidated, and secured loans such as mortgages, home equity lines of credit, and car loans will not apply. While each lender will have different requirements, the most common factors that affect your ability to qualify include:

• Having a good credit rating – a lower credit score will decrease your ability to secure a debt consolidation loan; in some cases, creditors in Calgary may qualify you for the loan, but at a much higher interest rate.

• Your debt service ratio - when reviewing your application, lenders will most likely take your debt service ratio into account. This is the percentage of your monthly gross income required to make all of your minimum debt payments, both secured and unsecured. If your ratio is too high (typically, over 35%), it may be more difficult to find lenders willing to approve you.

A general guideline is that credit scores over 660 have the best chance of getting approved. 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.

It is important to note that there are other debt relief options if you do not qualify for a debt consolidation loan. We recommend contacting a credit counselling organization near you to further evaluate your unique circumstances; simply talking to a credit counselling agency won't affect your credit score.

Calgary residents can apply for a debt consolidation loan through most credit unions, major Canadian banks, and other online lenders. In-person applications may have longer processing times, whereas online applications may be quicker and might have more lenient qualification criteria.

If you’re not sure where to apply, the best thing to do is compare lenders online. You can sign up to Borrowell for free and easily compare debt consolidation loan options from trusted Canadian lenders. With the platform, 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.

Yes, debt consolidation loans may help your credit score if you make consistent, on-time payments. However, if you apply for multiple debt consolidation loans, your credit score may initially be impacted, as several credit inquiries in a short period can lower your score. 

If you don’t manage your loan properly, you could negatively impact your credit score. Late payments can have a big impact on your credit score — even up to a 150 point decrease.

The average Canadian owes close to $1.78 for every dollar earned. Some of the most common sources of debt for people in Calgary are:

• Loss of income – Job losses are unpredictable, especially during difficult economic challenges such as COVID-19. For this reason, whether it is an accident, illness, termination, or layoff, we advise being prepared with an emergency fund.

• Credit card debt – Consumers often purchase items with the intention of paying the debt in the future rather than paying with cash immediately. With interest rates as high as 22%, credit cards can become difficult to pay down, resulting in accumulated debt over time.

• Loans and payments – Whether its student loans, car payments, divorces, or medical expenses not covered by Alberta healthcare, it is easy to accumulate debt quickly, especially if you are living beyond your means, and have minimal savings and limited financial knowledge.

Debt consolidation loans in Calgary fall into two main two categories: 

• Unsecured loans that do not require collateral, typically involving lower qualifying amounts and higher interest rates

• Secured loans that are backed by assets such as your house or car as collateral in order to secure the new loan

The main difference between secured and unsecured loans in Calgary is that a secured loan involves guaranteed repayment through the use of collateral. Because of this collateral, secured loans tend to be available in bigger amounts and feature much lower interest rates than unsecured loans.

This will depend on your individual situation, as well as the conditions set by each lender. Typically, banks and credit unions are only willing to lend people around 10% of their net worth (your assets minus your debts) on an unsecured basis. Many lenders have debt consolidation loan calculators that you can access online for quotes.

Typical interest rates for debt consolidation loans in Calgary can range from 5% to 30%. These rates are impacted by many factors, including the lender you work with, your financial history, and your credit score.