Must read: Best debt consolidation loans in Canada
Compare debt consolidation loans in Ottawa
Find the right option for you to consolidate debt in Ottawa using this guide.
Consolidating debt can help you get a handle on your finances and even improve your credit score in the long term. Use this guide to learn more about how debt consolidation in Ottawa works, how much it might cost you and where you can apply.
Compare debt consolidation loans in Ottawa
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How to get the best Ottawa debt consolidation loans
Look for the following factors when choosing the best Ottawa debt consolidation loans:
- Low interest rates. Look for the lowest interest rates possible, and make sure that your new rates fall below the rates you already have on your existing debts. If your rates will be higher, it may be time to consider a debt management plan. Learn more about low interest loans.
- Longer term. Aim for a longer term to get lower monthly payments, but expect to pay more interest over time. Choose a shorter term to save on interest and pay your loan down faster, with higher monthly payments.
- Credit score requirement. Find out what your credit score needs to be to qualify for the loan you’re interested in. Avoid applying for bad credit loans if the interest rates are higher than what you currently owe on your existing loans.
- No fees. Some lenders will bury hidden fees and charges in your contract, so make sure to read the fine print thoroughly. Avoid lenders that don’t let you prepay your loan early or charge set-up or service fees.
- Easy application. Look for a lender that will let you apply online with minimal paperwork. But take the time to check reviews to make sure they’re reputable.
How does debt consolidation in Ottawa work?
Debt consolidation in Ottawa usually works in one of three ways:
- Combine debts with a loan or credit card. Take out a loan to pay off all of your outstanding debts, and make one manageable repayment on that loan. If you only have credit card debt, transfer what you owe over to a balance transfer credit card to get a 0–3.5% interest rate for up to 12 months (compared to 19.99% with a regular card).
- Negotiate lower rates or a longer term. Use a debt management plan to negotiate lower interest rates with your creditors, or see if you can extend your repayment period to lower your monthly payments. This option could moderately damage your credit, but not as badly as debt settlement.
- Reduce and settle debts with your creditors. You can use a debt settlement program or a consumer proposal to repay your creditors a portion of what you owe, with them offering debt forgiveness for some of your repayment. Just be aware that this option will significantly impact your credit score.
Alternatives to debt consolidation loans
- Line of credit. A line of credit is a pool of funds you can access at any time, up to a certain limit. You can spend as little or as much as you want at one time, and you’ll only pay interest on the money you borrow, with the rest on reserve until you need it.
- Balance transfer credit card. Balance transfer credit cards come with promo rates usually between 0% and 3.5%. You can transfer your balances over from other higher interest cards, and pay them down within the promo period to lower your overall interest.
- Debt management program. These programs negotiate with your creditors to reduce your interest or the length of your repayment period. You’ll still repay everything you owe but with lower rates or a shorter term. This method will lower your credit score significantly.
- Debt settlement. These services negotiate with your creditors to reduce your overall debt load. They then pay off your debt, and you repay the debt settlement company back directly. This method lowers your overall repayment but your credit score will suffer.
- Consumer proposal. This is a legally binding process administered by a Licensed Insolvency Trustee (LIT). Your LIT develops an offer to pay creditors part of what you owe. This option will also lower your credit score significantly, but it can help get you out of debt.
Who offers debt consolidation in Ottawa?
You can find debt consolidation services with the following providers.
- Personal loan providers. Personal loan providers offer secured and unsecured debt consolidation loans in Ottawa. Sample providers include Loans Canada, LoanConnect, SkyCap Financial and Mogo.
- Banks and credit card companies. Many banks partner with credit card companies to offer balance transfer cards. Some examples include the MBNA True Line Mastercard, the CIBC Select Visa, the Scotiabank Value Visa or the BMO Preferred Rate card.
- Credit counselling agencies. These agencies are non-profit organizations that provide credit and debt counselling (including debt management plans) for free to Canadians. The Credit Counselling Society of Ottawa is the main provider of this service in the city.
- Licensed Insolvency Trustees. LITs are federally regulated professionals who provide advice and services to individuals and businesses with debt problems. They usually operate through private firms. Sample providers include Goldhar & Associates, Doyle Salewski Inc. and MNP debt.
How will debt consolidation in Ottawa affect my credit?
Depending on which debt consolidation option you go with, your score will do different things:
- Debt consolidation loan. Your score will go down temporarily when you apply for a new loan since your lender will do a hard credit check. Your credit score will usually increase over time as you make on-time payments.
- Balance transfer credit card. Your score will usually stay the same if you don’t close your other credit cards. If you do close your cards, your score may go down because it lowers your credit utilization. Your score will go up as you make on-time payments.
- Debt management, debt settlement and consumer proposal. These three options will have a significant negative effect on your credit score and will be on your credit record for two to six years.
When to get a debt consolidation loan
You may want to consider Ottawa debt consolidation loans in the following circumstances:
- Your debt has become unmanageable. Consider debt consolidation when you have multiple small debts or a very high interest rate for your debts. Consolidating with a lower interest loan can give you one easy payment and help you pay your loan off faster.
- You want better terms. You’ll usually get better interest rates if your credit score has gone up since you applied for your original loans. You may also be able to get a longer term, which can help lower your monthly payments.
- You’re trying to build credit. Consolidating debt can make it easier for you to make your payments on time, which can increase your credit score. Just make sure you can afford your new monthly payment before you sign onto a new loan.
When to avoid a debt consolidation loan
Avoid Ottawa debt consolidation loans if you meet these conditions:
- Your credit score has gone down. You won’t get a competitive interest rate if your credit score has gone down. You can still consolidate your debt if you need a longer term, but avoid doing so if your interest rates will be higher than they are with your original loans.
- You can’t afford a consolidated payment. Avoid consolidating your debt if you think you won’t be able to make a consolidated payment. In this case, you may want to pay your smaller debts off first to get rid of your debts one by one (also known as the debt snowball method).
What are the eligibility requirements for debt consolidation loans in Ottawa?
Requirements vary by lender but you typically need to meet the following criteria:
| Criteria | Documents required |
|---|---|
| Canadian citizen or resident | Passport, travel visa and residency documents |
| Age of majority in your province (18 or 19 years old) | Government-issued ID, usually a passport or driver’s licence at minimum |
| Meet minimum income requirements | Pay stubs, bank statements and tax returns. Some loans offer instant bank verification. |
| Meet minimum credit score requirements | Consent to have your credit score checked (may require your Social Insurance Number). |
| Active bank account | Direct deposit information |
How much is a debt consolidation loan in Ottawa?
Learn how much you’ll pay for a $10,000 loan in Ottawa, with an interest rate of 8.99% or 12.45% over three and five years.
| Loan 1 (3 years) | Loan 1 (5 years) | Loan 2 (3 years) | Loan 2 (5 years) | |
|---|---|---|---|---|
| Balance | $10,000 | $10,000 | $10,000 | $10,000 |
| Interest rate | 8.99% | 8.99% | 12.45% | 12.45% |
| Year(s) to pay off | 3 | 5 | 3 | 5 |
| Monthly payment | $317.95 | $207.54 | $334.30 | $224.73 |
| Total interest paid | $1,446.23 | $2,452.10 | $2,034.67 | $3,483.51 |
| Total balance paid | $11,446.23 | $12,452.10 | $12,034.67 | $13,483.51 |
As you can see, you’ll pay lower monthly payments with a longer term, but more in interest over time. With a shorter term, you’ll pay higher monthly payments but less interest over time. A higher interest rate from the start will also drive up the cost of your loan.
What types of debt can you consolidate?
With most Ottawa debt consolidation options, you can only consolidate unsecured debt. This includes credit cards, unsecured loans, lines of credit, child support arrears, tax debt and public utility bills. You won’t typically be able to consolidate secured debts such as your mortgage, car loan or government-issued student loan.
Ottawa debt at a glance
The average debt in Ottawa increased in 2022. Debt consolidation in Ottawa is designed to help average citizens reduce or manage their debt.
Debt in Ottawa
According to Equifax, the average non-mortgage debt for Ottawa residents for the third quarter of 2022 was $19,053 (vs $18,893 in the second quarter and $18,454 in the first quarter). This is slightly lower than the average debt for Ontarians, which rang in at $21,456. The average level of debt for people across Canada for the same time was $21,183 (so Ottawa is lower across the board).
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