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Jean Fortin - Syndic autorisé en insolvabilité Jean Fortin - Syndic autorisé en insolvabilité
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What is debt consolidation?


What is debt consolidation?

Debt consolidation is a loan granted by your financial institution to reimburse all your other creditors, Your payments are merged into one monthly installment payable over a maximum period of 5 years. The interest rate is usually 12% per year (or more) but it will not affect your credit rating.

If the financial institution refuses to grant you such a loan or if the required monthly payments are too expensive, the consumer proposal may prove to be a very interesting alternative.

A good option for you if:

  • Your credit rating is good.
  • You have the financial capacity to reimburse a loan for 100% of your debts plus 12% interest.

Good for you if:

  • You have a sufficiently good credit rating to obtain a loan
  • You have enough money every month to pay out the loan with a 12% interest rate.

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Requirements for a consolidation loan


Requirements for a consolidation loan

  1. A debt ratio below 40% (Calculate your debt ratio);
  2. A good credit rating, i.e. very few or no late payments;
  3. Stable employment.

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What are the benefits


What are the benefits

  • 100% refund of your debts over 5 years
  • Only one payment per month, so easier to manage
  • Interest rate (12%) lower than credit cards
  • Keeping your credit record

is normally the maximum allowed debt ratio to be eligible for debt consolidation.

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How do I know if debt consolidation could be a good solution for me ?

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What are the factors to consider for a debt consolidation?

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Why are financial institutions reluctant to grant a consolidation loan?

Firstly, by paying your creditors, the financial institution assumes, alone, the risk that each of your creditor had in regards to their individual debt. Therefore, they would be the only one to lose if, by unfortunate circumstances, you became unable to pay.

Secondly, they fear that you might be tempted to incur new debt after your consolidation loan. In fact, once repaid, your former creditors will not hesitate to solicit your business again. New debt on your part would add to your monthly consolidation payments and increase the risk of financial difficulties.

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