📅 Last Updated: March 6, 2024
✏️ Written By Kale Havervold
🕵️ Fact-Checked by Caitlin Wood

Out of all the provinces in Canada, no province struggles with debt more than Alberta. They have thousands of dollars more (on average) in consumer debt than the national average. This isn’t a huge issue if you make enough or have enough to pay it off, but many people in Alberta don’t.

These people in Alberta often struggle with months or even years of late payments, taking out payday loans, and seeing their credit report get destroyed. However, there are programs and services available in Alberta to help with debt relief and one of the most popular is debt consolidation.

Made a late payment? Here’s how you can rebuild your credit.

The Two Different Types of Debt Consolidation in Alberta

Debt consolidation is basically when a consumer takes out one larger loan to pay off all of their smaller loans. This makes their monthly payments much easier to manage and more affordable. One of the main benefits that all consumers in Alberta should look for when choosing a debt consolidation loan, is a lower interest rate. The lower interest rate will help you save you money and the smaller monthly payments can make it simpler to pay off your debts quickly.

Consider this when you’re shopping for low-interest rates.

It’s important to keep in mind that in order to get a debt consolidation loan that is large enough and that has an affordable interest rate, you need to have an average to good credit score.

A Debt Consolidation Program

However, in addition to the standard debt consolidation loan, there is also an option for a debt consolidation program, sometimes referred to as a debt management program. When you enter into a debt management program, you work with a professional who will negotiate with your creditors directly. The job of this professional is also to help create a unique and personalized payment plan to help you be able to manage your debts going forward.

Was your application for a debt consolidation loan denied? Look here for a solution.

These programs are great for those with bad credit that cannot qualify for a consolidation loan or those who simply cannot keep up with their debt and need the help of a professional. So while you should try qualifying for a consolidation loan first, a debt consolidation program is definitely a great option to get your finances under control.

Learn How to Tackle DebtTake a look at this infographic for more debt relief help.

What Debts Can Be Consolidated in Alberta and Which Cannot?

However, before you assume that all of your debts can be consolidated and made simpler, that, unfortunately, isn’t the case. There are some types of debt that are not eligible to be consolidated in Alberta and Canada, in general. Let’s take a closer look at the types of debt that can and cannot be consolidated.

Can Be Consolidated in Alberta

  • Credit card debt
  • Unsecured personal loan debt
  • Auto repossession debt
  • Non-government student loan debt
  • Some medical bills

Cannot be Consolidated in Alberta

  • Mortgages
  • Auto loans
  • RV loans
  • Government loans
  • Back taxes

If you are confused about whether your specific kinds of debt can be consolidated, be sure to reach out to an expert or professional. Not only will they be able to provide you with this information but they can guide you through the debt consolidation process or even suggest an alternative debt relief option available in Alberta that may better suit your needs.

Need another debt management product? Look here.

How Does Debt Affect Credit?

If you are considering debt consolidation, you are likely the owner of a fair amount of debt. If you have ever been curious about how much your debt affects your credit, you are not alone. The two largest factors that are used in the calculation of your credit score are how much debt you carry from month to month and whether or not you make your payments on time. This means your debt level has a pretty big effect on your credit report and score.

Carrying a lot of debt and using a lot of your income to pay off your debt can hurt your credit score, so you are better off keeping it controlled and paying off your debt as quickly as possible. The type of debts you have and how long you have had credit accounts open for can also affect your credit as well. The longer that you have had an account open, the better it will be for your credit, due to your long history of (hopefully) making payments.

Canadian Credit ScoreInterested in information about how your credit score is calculated? Take a look at this infographic.

How Can Debt Consolidation Help?

Paying down debt is always a good idea, both for your overall financial health and the health of your credit. Debt consolidation, whether it’s a loan or a program can help you become debt free and get back on track. Your credit won’t improve overnight, but the good news is it’s you have the ability to build the credit score you want and need.

Frequently Asked Questions

Can debt consolidation lower my credit score?

In the beginning, a credit check may be required which will lower your credit score a bit. But, in the long run, your score should improve, especially if you have bad credit. According to TransUnion, if your score is under 600, there is an 84% chance of improving your score by 20+ points if you consolidate your debts.

When should I consolidate my debts?

There’s a window of opportunity for consolidating your credit. When less than half your income is going towards loan repayments, and you have a fair credit rating of just under 600, then it may be a good idea to consolidate. You’ll need to be prepared to budget and stay out of further debt. Racking up more debt while you are consolidating existing loans is a recipe for disaster.

Which debts can I consolidate?

Certain debts are best suited for consolidation while others are not. It’s best to consolidate any unsecured debts with high interest rates, such as credit cards and personal loans. Student loans or debts owed to a tax agency like the CRA shouldn’t be consolidated. Those should be negotiated separately. Secured loans like car loans, mortgages, and home equity loans shouldn’t be consolidated either. But, they can be rewritten by your lender to consolidate unsecured debts.

Helping You With Debt Consolidation Needs

Dealing with debt consolidation and other debt relief options can be tricky, but you don’t need to go at it alone. We at Loans Canada are confident that we can help you find the right option for your needs in Alberta.

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