Debt Consolidation Loans in Nova Scotia

Debt consolidation loans can help consumers take care of many different types of debt. These types of debt include: 

• Credit card debt - If you have a high credit card balance, a debt consolidation loan can help you pay off this high interest debt

• Personal loan debt - If you have taken out multiple unsecured loans for big purchases, you can consolidate them into a single loan to simplify the repayment process

• Lines of credit - If you need to pay off a line of credit, a debt consolidation loan could help you pay it off with a lower interest rate

• Utility bills - If you’re worried about missing utility bill payments, a consolidation loan can help you bring your bills up to date and avoid future penalties

While debt consolidation can be extremely helpful, not all forms of debt in Canada can be consolidated. Secured debt, where borrowers are required to put up assets as collateral, typically does not qualify. Other forms of debt you can not consolidate include: 

• Mortgages

• Government student loans

• Car loans or RV loans

• Back taxes owed to the Canada Revenue Agency

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. 

Yes, there are differences between good debt and bad debt that you should learn about. “Good debt” is money you borrow that can help you generate income or increase your net worth. Examples of “good debt” include:

• Education or tuition fees

• Funds to invest in your small business or freelance career

• Real estate 

Debt is considered “bad” if you are borrowing money to purchase depreciating assets, or if the funds you are borrowing have a high interest rate and you are unable to manage your payments properly. 

For example, consumer debt - such as credit card debt - can accumulate quickly, and certain credit cards may have high interest rates.

When searching for a loan in Nova Scotia, you should determine the type of debt you are taking on and how it will affect your financial health overall. A debt consolidation loan can be a useful way to merge multiple debts into a single debt with one monthly payment at a lower interest rate that’s easy to manage. A debt consolidation loan can be considered good debt if your monthly payment is consistently made on time and the interest rate on your consolidation loan is lower than your other debts.

If a debt consolidation loan seems like the best debt relief option for you, it is important to determine if you qualify. While each lender will have different requirements, the most common factors that affect your ability to qualify include:

• Your credit score – Having a high credit score is a major factor that will help you qualify for the best loans; if you have a low credit score (below 660), creditors in Nova Scotia might deny your application, or they will qualify you for a loan at a much higher interest rate.

• Your debt service ratio - 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, as they may feel you are less likely to make regular payments on time.

Borrowers with credit scores over 660 have the best chance of getting approved for a debt consolidation loan in Nova Scotia. 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.

There are other debt relief options if you do not qualify for a debt consolidation loan. For example, if you have declared bankruptcy, a credit counselling organization near you can help you evaluate your unique circumstances and determine your next steps to improve your financial health.

The first step you should take is to 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. Once you’ve found the right loan, you can begin your application through the Borrowell platform.

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. 

Mismanaging your loan could negatively impact your credit score. Late payments can have a big impact on your credit score — even up to a 150 point decrease.

You can take the first step to becoming debt free by signing up for Borrowell to see what consolidation loan options are available based on your credit score; Borrowell only shows you loans that you meet the requirements for. Once you’ve found the best loan that fits your credit profile, you can apply online starting on the Borrowell platform.

In general, debt consolidation loans can range from $500 to $35,000. The amount that you can qualify for will depend on your individual situation, as well as the specific conditions set by the lender you work with. 

Typically, banks and credit unions across Nova Scotia will only 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 Nova Scotia 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.

If you are unsure about your ability to qualify for a debt consolidation loan, there are other debt relief options available to you. Credit counselling organizations can help you evaluate your unique circumstances; and contacting a credit counselling agency will not affect your credit score. Credit counselling agencies are staffed with certified counsellors who will support you in your journey to becoming debt-free through an emphasis on financial education and an organized debt settlement plan.

If you are considering a debt consolidation loan in Nova Scotia, it will be important to weigh the pros and cons of taking it on. 

Here are the pros of a debt consolidation loan:

• Paying one monthly payment will help simplify 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

Here are the cons of a debt consolidation loan:

• Securing a lower interest rate is very important; otherwise, you may be repaying your debts with a higher interest rate than your original loans

• If you are unable to manage your loan properly, you could negatively impact your credit score; for example, late payments can substantially impact your credit score

• Longer repayment terms may mean you pay more interest on your loan in the long run