The Best Debt Consolidation Loans in Alberta for 2024
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Alberta is one of the provinces with the highest levels of non-mortgage debt in Canada.
This is why many people in Alberta consider debt consolidation loans. This helps them manage their finances and get lower interest rates.
In this guide, we will help you understand how debt consolidation works in Alberta and answer all common questions you might have related to the service. Eventually, this guide will help you make an informed decision when choosing a debt consolidation lender in Alberta. Let’s get started!
How does debt consolidation work in Alberta?
One of the main benefits of debt consolidation in Alberta is that it allows you to combine all the debts into one card or place. You just take one big loan from the lender, which comes at a lower interest rate than normal loans. And then, you pay off all of your debts using that loan. Now, you have one big loan to pay instead of multiple ones. You can pay your debt consolidation loan through monthly instalments over a set term. Here is what you can do to get debt consolidation in Alberta:
- Consider a balance transfer credit card or a debt consolidation loan
- If you don’t qualify for a loan or credit card, you may inquire about a debt management plan with a nonprofit credit counselling firm.
Expert advice
In some cases, a consumer proposal or bankruptcy is your only option for escaping debt. They both strongly damage your credit score and history and will have an impact on your ability to borrow for years. Consult with a professional first to understand your options.
Here are two examples to help you understand the benefits of debt consolidation:
For example
Let's assume that you live in Edmonton and have an $18,000 balance on your credit cards at a 22% interest rate. You decide that you want to be debt free in six years and are offered a 10% interest rate on your new loan. For this, you’ll need to repay $333.47 monthly.
For example
Now, imagine you have a younger brother with identical debt shopping for a debt consolidation loan in Calgary. He has a more flexible budget and prefers to pay off his credit cards faster. He consolidates his debt over a short 4-year term at the same 10% interest rate. He’ll owe $456.53 per month — almost exactly what he paid before.
Both you and your brother come out ahead with your debt consolidation loans. You pay a total $6,009.49 in interest while dropping your monthly payments by almost $120 per month. You'll save more than $8,000 in interest. Your brother, who favours a shorter term over a lower monthly payment also comes out ahead. He gets out of debt sooner and save more than $10,000 on interest payments.
Here's a peek at the numbers.
| Terms | Original debt | Debt Consolidation Loan A | Debt Consolidation Loan B |
|---|---|---|---|
| Balance | $18,000.00 | $18,000.00 | $18,000.00 |
| Interest rate | 22% | 10% | 10% |
| Duration | 6 | 6 | 4 |
| Monthly payment | $452 | $333.47 | $456.53 |
| Total interest paid | $14,563.46 | $6,009.49 | $3,913.27 |
| Total paid | $32,563.46 | $24,009.49 | $21,913.27 |
When is debt consolidation a good idea?
Debt consolidation can prove to be a good idea in many cases. For instance, it can save you serious money when you have multiple high-interest-rate loan. Debt consolidation in Alberta can be a good idea for you if:
- You want to get the benefits of a low-interest loan and save some money eventually.
- You want to have the flexibility to make repayments over a longer duration than normal loans.
- You want to have the convenience of making one monthly payment instead of paying multiple bills.
Debt consolidation is valuable because it can help you get your budget under control. And that’s not the best part: it comes at a lower interest rate than your usual loans.
What types of debt consolidation are available in Alberta?
Alberta has a lot of options for debt consolidation for its citizens. Every debt consolidation loan has strict eligibility criteria. For instance, you need to be a Canadian citizen or resident to get debt consolidation. Take a look below at some of the most common types of debt consolidation loans available in Alberta:
- Secured debt consolidation loan: Best for people who own a valuable asset to secure the loan, secured debt consolidation loans offer a low-interest rate and don’t really rely on your credit score.
- Unsecured debt consolidation loan: For these loans, you don’t need any collateral. You’re good to go if you have a good credit score. These loans have higher interest rates than secured debt consolidation loans.
- Balance transfer credit card: With the help of a balance transfer credit card, you can move all your debts onto one card that comes with a lower interest rate.
- Debt management program: In these programs, you get your budget reviewed by financial experts who also negotiate with your lender so you can consolidate your unsecured debts through one monthly payment. It comes with minimum to no interest.
- Debt settlement: It allows you to negotiate with your creditors to pay off your debt in one lump sum lower than your remaining debts. Usually, credit counsellors or debt settlement firms negotiate on your behalf.
| Type of Loan | Best For | Interest Rate |
|---|---|---|
| Secured debt consolidation loan | People who own a valuable asset to secure the loan | Starts at 5.4% |
| Unsecured debt consolidation loan | People who don’t have collateral to secure their debt but have a good credit score | 5.99% to 46.96% based on your credit score |
| Balance transfer credit card | People who are dealing exclusively with credit card debt |
|
| Debt management program | People with sufficient funds to repay their debts but looking to reduce their monthly payment amount or interest rates | N/A |
| Debt settlement | People who are unable to afford their debt and looking to avoid any harsh action by creditors | N/A |
What do you need to qualify for debt consolidation?
There is a long list of qualifying factors for debt consolidation in Alberta, which may vary from lender to lender. To start with, you must have a decent credit score to qualify for a debt consolidation loan in Alberta. Here are the other things you need to qualify for debt consolidation in Alberta:
- A long and good employment history
- Canadian citizenship or residency
- A regular income to cover your expenses and pay your monthly bills
- Some collateral to secure your loan, such as a house
Good to know
Wondering how a debt consolidation loan can help you? Our debt consolidation calculator projects how much you could save.
What kinds of debt can be consolidated?
Debt consolidation loans are a good choice for people with heavy or high-amount loans that they can’t pay off with their current income even if they tried hard. Here are some debts you should consolidate:
- Credit card debt
- Student loans
- High-interest personal loans
- Business loan debt
- Lines of credit
- Tax debt
- Medical bills
Ideally, you should consolidate the above debts as a priority and should avoid taking a debt consolidation loan if you have a small debt load that you can pay off within six months or a year from your current income.
Where can I get help with debt consolidation in Alberta?
The lenders at the top of this page are a good place to start shopping for a debt consolidation loan. You might also consider a local lender like Servus Credit Union.
Compare debt consolidation loans
Expert advice
Alberta has strong consumer protection laws that help its citizens in case of fraud. You can file a complaint against a business or lender if you have been declined a debt consolidation loan in Alberta for unjustified reasons.
What is the interest rate on debt consolidation in Alberta?
In Alberta, you can find interest rates for debt consolidation between 5.45% and 32%. In some cases, it can be as high as 47% for people with a bad credit score. This is why we suggest maintaining a good credit score if you want to get debt consolidation in Alberta. Consolidating at a higher rate rarely makes sense.
While your credit score plays an important role in the interest rates, there are a couple of personal factors as well that can affect it, such as your debt-to-income ratio, income and credit score and ability to secure the loan through collateral, such as your vehicle or house.
How does debt consolidation affect your credit?
Debt consolidation can drop your credit score, but it’s going to be a temporary drop. Basically, you take a big loan from a lender which affects your credit score. It will bounce back and get back to normal if you make timely repayments.
We suggest you don’t go shopping around and apply for other debt consolidation loans at multiple banks at once, or else, your credit score will take more time to get back on track.
Tips for getting the best debt consolidation loan in Alberta
It can be really hard to get good debt consolidation loan providers in Alberta since that market is full of options, making it difficult for you to filter the good ones out. Before choosing a lender for a debt consolidation loan in Alberta, consider the following things:
- The interest rate offered by the lender
- Ease of the application process
- Role of credit score in the process
- Duration of the loan
In addition, you should compare interest rates, loan amounts, fees and terms offered by multiple lenders to make an informed decision. You should go through the consolidation process by visiting your lender’s website to understand the ins and outs of the process. Reading customer reviews before making any decision will help you to a great extent.
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