How to choose
Rule one: the new rate must be lower
It sounds obvious, but it is the rule most often broken. Consolidation only saves money if the loan
you take is cheaper than the debt it replaces. Refinancing 20% credit cards into a 30%+ unsecured
loan does not help — it just makes the debt feel handled while costing more. Before you sign
anything, put your real balances and the offered rate into the
debt consolidation calculator: it shows the monthly
payment, the lifetime interest, and whether the offer actually beats staying put.
Watch the term as hard as the rate
A lower monthly payment is not the same as a lower cost. Stretching a three-year payoff into a
five-year loan at a lower rate can still cost more total interest — the longer term quietly undoes
the rate cut. Aim for the shortest term whose payment you can comfortably afford. If you are choosing
between attacking debts you already have, the
snowball vs avalanche calculator shows which
payoff order saves the most.
Secured vs unsecured: a real trade
A secured loan (against home equity) almost always carries a lower rate — Fairstone's drops from the
high 30s to around 20% once secured. But you are converting unsecured debt into debt backed by your
home, which raises the stakes if you cannot pay. For a disciplined homeowner it can be a genuine
saving; for someone whose spending is the underlying problem, it risks the house. Decide honestly
which you are.
When a loan is the wrong tool. If your minimum payments barely cover the interest,
no consolidation loan fixes that — it only re-arranges it. The honest next steps are a non-profit
credit-counselling debt-management plan, or, if the debt is genuinely unpayable, a
consumer proposal through a Licensed Insolvency
Trustee — the only professional who can legally reduce what you owe.
Frequently asked questions
What is the best debt consolidation loan in Canada?
It depends entirely on your credit. For good credit, a low fixed-rate bank loan like Tangerine (from 8.99%, no fees, no penalty) is usually the cleanest win. For fair credit, goPeer stands out for publishing its exact eligibility and folding fees into the APR. Homeowners with weaker credit can reach ~20% with a secured loan from Fairstone. The only rule that always holds: the new rate must be lower than the debt you are clearing, or it does not help.
Does a debt consolidation loan hurt your credit score?
Usually only briefly. Applying adds a hard inquiry (a few points, recovered within months) and a new account lowers your average account age. But consolidation also cuts your credit-utilization ratio — paying off maxed cards with an installment loan often raises your score within a cycle or two. The real risk is behavioural: if the paid-off cards get run back up, you have doubled the debt. Freeze or close them.
What credit score do I need to consolidate debt?
The best unsecured rates go to scores around 660 and up. goPeer publishes a clear floor of 600. Below that, you are looking at higher-rate lenders, a secured (home-equity) loan, or — if the numbers no longer work — a non-profit credit-counselling plan or a consumer proposal. Borrowell offers a free credit score, which is a sensible first step before you apply anywhere.
Is a debt consolidation loan the same as a consumer proposal?
No. A consolidation loan repays 100% of what you owe at a (hopefully) lower rate — it is ordinary borrowing, and your credit takes only a small, temporary dip. A consumer proposal is a legal insolvency process filed through a Licensed Insolvency Trustee that can settle your debt for less than the full amount but stays on your credit report for years. A loan is for people who can afford payments at a better rate; a proposal is for people who genuinely cannot. See our full comparison.
What is the maximum legal interest rate in Canada?
The federal criminal interest rate is capped at 35% APR, in force since January 1, 2025 (down from the old 60% effective-annual-rate threshold, roughly 48% APR). A separate cap limits payday loans to $14 per $100 borrowed. Several lenders here price unsecured loans into the high 30s — legal, but a 35%+ "consolidation" loan almost never beats the cards it replaces. Always check the math first with the debt consolidation calculator.
How current are these rates?
Every APR, loan amount, term and fee on this page was verified at each lender's own website on June 13, 2026. Where a lender does not publish a figure first-party — including all of the Big Six banks, which quote personal-loan rates only on application — we say so rather than invent one. Rates change without notice and the rate you are offered depends on your credit and income; confirm in writing before signing. See our methodology.
This page is for educational purposes only and is not financial advice. APRs, loan amounts, terms
and fees were verified at each lender's own published pages on June 13, 2026 and change without notice;
anything not disclosed first-party (including all Big Six personal-loan rates) was excluded rather
than estimated. The rate you are offered depends on your credit and income. The federal criminal
interest rate is capped at 35% APR. Confirm all terms in writing before borrowing. See our
methodology.
