Debt Consolidation Options & Services

Are you juggling one creditor to pay another? Balancing credit payments against household expenses? If so, you may be looking for a way to consolidate credit so you can lower your monthly payments. Unfortunately, debt consolidation comes in many shapes and sizes in Canada. Knowing which to choose can be a challenge.

What Is Debt Consolidation

Debt consolidation is the process of combining multiple debts—like credit cards, payday loans, or lines of credit—into one monthly payment. It can help simplify your finances and, depending on the option, reduce your interest or even the amount you owe.

There are 4 main debt consolidation options in Canada:

1. Debt Consolidation Loan
2. Debt Management Plan
3. Debt Settlement Programs
4. Consumer Proposal

Each consolidation option has different pros and cons. Not sure which is right for you? We’ll walk you through them below—or talk to us now for personalized advice.

How Much Could You Save?

A consumer proposal is often the safest, lowest cost debt consolidation option if you are dealing with more than $10,000 in debts, can’t qualify for a debt consolidation loan and are struggling to keep up with your monthly payments.

Use our free debt calculator to compare your options and estimate your monthly payment. It takes just a minute and can help you make a more informed decision.

Debt Consolidation Loan

A debt consolidation loan lets you refinance multiple debts—like credit card debt, payday loans, or lines of credit—into one new loan. You repay your debts in full, but ideally at a lower interest rate and with a single monthly payment.

Common types of debt consolidation loans can include:

• Personal loan or line of credit
• Balance transfer credit cards
• Second mortgage or home equity loan
• Co-signed loan from a bank or credit union

To qualify for debt consolidation you must meet the following criteria:

• Have a stable income
• Have good credit or valuable collateral
• Meet any debt-to-income requirements of your lender
• Be able to afford your consolidated payments

Advantages of Refinancing With a New Loan

• You replace many payments each month with only one payment which makes budgeting easier
• You get a lower interest rate than on most credit cards
• You reduce monthly payments by extending the term

Disadvantages of Debt Consolidation Loans

• You still owe the full amount of your debt
• If you have bad credit, your interest rate may be high
• You may require a co-signer or putting your home or assets at risk
• If you miss payments, you could damage your credit or lose collateral
• Depending on your payment terms, it can take longer to get out of debt with a debt consolidation loan.

Here are some additional risks of debt consolidation loans to consider:

• If you consolidate credit cards but keep using them, your debt can spiral again
• If interest rates rise (especially on variable rate loans), your payment could increase
• If housing prices fall, you may owe more than your home is worth

Don’t Qualify?

If a lender says no—or the payments are just too high—you still have other options. Talk to a Licensed Insolvency Trustee (LIT) about safer, interest-free alternatives like a consumer proposal.

Debt Management Plan

A debt management plan is a voluntary debt repayment program through a credit counselling agency. It allows you to consolidate certain debts into one monthly payment, often with reduced or no interest.

Here is how you can consolidate with a debt management program:

• You make one monthly payment the agency
• They distribute funds to your creditors
• Most creditors freeze interest while you’re in the plan
• You repay 100% of your debts, usually within 3–5 years

Advantages of a Debt Management Plan

• One affordable debt payment
• You can choose to include or exclude certain debts
• You get interest relief allowing you to pay off your debts sooner

Disadvantages of a DMP

• You must repay your debts in full
• Some creditors may not participate 
• Does not cover payday loans, tax debt, or student loans
• There is no legal protection from wage garnishments or collection calls

There are still risks with using a credit counsellor to consolidate debts:

• Not all agencies are equal—look for non-profit or accredited ones
• If you miss payments, creditors may resume interest or collections
• If your debt load is too high to repay in full, a DMP may not work

Not Sure if You Qualify?

Let us review your situation and see whether a DMP or consumer proposal would work better for you.

Debt Settlement

Debt settlement involves negotiating directly with creditors to pay less than the full amount you owe. Some private companies offer to handle this for you—but not all are reputable.

Debt settlement companies are not offering you a new debt consolidation loan. Instead, they offer is to combine selected debts (usually just credit card debt) into a single payment with their company.

• You (or a third-party company) offer a lump-sum payment to settle a debt
• Creditors may accept less, but there are no guarantees
• Often requires you to stop making payments and save up before negotiating

Advantages of Debt Settlement

• May reduce the total amount you owe

• Can resolve simple small debts

Disadvantages of Debt Settlement

• Can seriously damage your credit (due to missed payments)
• No guarantee creditors will accept your offer
• Fees from settlement companies can be very high
• Collections and legal action may continue during negotiations

Be cautious when working with an unlicensed debt consultant.

• Many “government debt consolidation” companies are really just selling settlement services
• You may pay high fees upfront with no results
• Some companies refer you to a Licensed Insolvency Trustee anyway—something you can do yourself for free

Our Advice:

If you only have one or two creditors and have a lump sum of money, you may be able to negotiate a debt settlement successfully on your own.  However, if you have significant debts, book a consultation with us to explore safer, regulated alternatives like a consumer proposal.

Consumer Proposal

A consumer proposal is a legal process under the Bankruptcy and Insolvency Act that allows you to settle your debts for less than you owe. It’s administered by a Licensed Insolvency Trustee and offers protection from creditors.

A consumer proposal both consolidates debts and provides debt relief:

• You offer to repay a portion of your debts through fixed monthly payments over up to 5 years
• Your creditors vote to accept the proposal
• Once accepted, it becomes legally binding and stops all collection actions

It is generally the best consolidation option if:

• You can’t qualify for a consolidation loan
• Your debt is over $10,000 and you can’t repay in full
• You want to avoid bankruptcy while still reducing your debt

Advantages of a Consumer Proposal

• Reduce your debt by up to 80%
• Deals with most unsecured debts
• Eliminate all future interest
• One affordable monthly payment
• Keep your home, car and other assets
• Stops wage garnishments and collections
• Legally finding once accepted

Disadvantages

• Affects your credit (R7 rating) although the impact is less than bankruptcy (and the same as a debt management plan)
• Not available for secured debts like mortgages

Why a Consumer Proposal May Be a Better Option

A consumer proposal combines the predictability of a debt management plan with the debt relief benefits of settlement—without the legal risks. It’s one of the safest, most affordable ways to become debt free.

Want To Know If You Qualify?

Book a free consultation today with a Licensed Insolvency Trustee. There’s no pressure, and we’ll walk you through all your options.

Debt Consolidation FAQs

Ontario Trusted Debt Consolidation Experts Near You

Get Real Help—From Licensed Professionals

Working with a Licensed Insolvency Trustee offers advantages that go beyond what traditional financial institutions can provide. LITs are government-regulated professionals who provide objective advice about options for consolidating debt tailored to your specific financial situation.

At Hoyes Michalos, you work directly with a federally licensed expert who will help you understand your options and choose the right path.

• ✅ 99% consumer proposal acceptance rate
• ✅ Zero upfront fees
• ✅ Offices across Ontario + video consultations
• ✅ Free consultations

We’ll help you build a personalized plan to be debt free—without judgment or pressure.

Hoyes Michalos has offices across Ontario, with local Licensed Insolvency Trustees who understand your area, your cost of living, and your challenges.

Prefer to meet virtually? We offer phone and video consultations across the province.

Other service areas

We offer the convenience of phone and video-conferencing services in the following additional locations: