Compare paying off your current debts separately versus consolidating them into a single new loan.
This calculator compares the total interest you'd pay continuing with your current debts (each paid off independently with its own fixed minimum payment) versus rolling them all into a single new consolidation loan at one interest rate and term, so you can see whether consolidation would actually save you money.
For your current debts, this calculator simulates each one being paid off independently at its own fixed minimum payment until the balance reaches zero, tracking total interest paid across all of them. For the consolidation option, it combines all balances into a single loan amount and calculates a standard amortized monthly payment over your chosen term at the consolidation rate, tracking total interest for that loan.
Formula: For each current debt, each month: Interest = Balance × (Rate ÷ 12); Payment = min(Fixed Minimum Payment, Balance + Interest); Principal = Payment − Interest; repeat until Balance = 0; sum interest across all debts. For the consolidation loan: Total Debt = sum of all balances; Monthly Payment = standard amortization formula using Total Debt, the consolidation rate, and term; Total Interest = sum of monthly interest over the loan's life. Interest Savings = Current Total Interest − Consolidation Total Interest.
Example: Two debts - CA$5,000 at 20% with a CA$150 fixed payment (paid off in 50 months, CA$2,359 interest), and CA$8,000 at 12% with a CA$200 fixed payment (paid off in 52 months, CA$2,268 interest) - total roughly CA$4,627 in combined interest if left as-is. Consolidating the CA$13,000 total into a single loan at 10% over 5 years (enter the actual rate quoted by your lender) would require a monthly payment of about CA$276.21 and total interest of roughly CA$3,573 - an interest savings of about CA$1,054. (Note: this example is for illustration purposes only.)
Debt consolidation loans in Canada are offered by banks, credit unions, and online lenders, and can be secured (such as a home equity loan or HELOC - see our Home Equity Loan Calculator and HELOC Calculator, often with the lowest rates) or unsecured (a personal loan - see our Personal Loan Calculator, typically at a higher rate than secured options but still often below credit card rates). Whether consolidation saves money depends on the rate you qualify for relative to your current weighted-average rate, the new term (a longer term can lower your monthly payment but increase total interest even at a lower rate, so compare total interest, not just the monthly payment), and any fees associated with the new loan. A consolidation loan can also simplify your finances into a single monthly payment with a fixed payoff date, which has value beyond pure interest savings for some people. However, consolidation doesn't reduce the amount you owe - if you use newly freed-up credit (such as paid-off credit cards) to accumulate new debt, you could end up worse off overall. If your debts are unmanageable even with consolidation, a non-profit credit counselling agency can discuss other options, including a formal debt management plan or, in more serious cases, a consumer proposal or bankruptcy under federal insolvency law.
No - consolidation combines your existing balances into a new loan, but the total amount owed (before any interest) stays the same. The potential benefit comes from a lower interest rate and/or simplified payments, not from reducing the principal. Whether it saves you money depends on the new rate, term, and any fees compared to your current debts.
A secured loan (backed by an asset like your home, e.g., a HELOC or home equity loan) typically offers a lower interest rate but puts that asset at risk if you can't make payments - converting previously unsecured debt (like credit cards) into debt secured by your home is a meaningful trade-off. An unsecured personal loan doesn't carry that risk but usually has a higher rate. Compare the rates and consider your risk tolerance - see our HELOC Calculator, Home Equity Loan Calculator, and Personal Loan Calculator.
A longer term spreads payments over more months, which lowers the monthly payment but means interest accrues for a longer period - depending on the rate difference and term extension, the total interest paid could end up higher than your current debts even though the rate is lower. Always compare total interest over the full term, not just the monthly payment amount.
This depends on the type of consolidation. A consolidation loan typically pays off your existing debts, after which those accounts show a zero balance (you may choose to close them or keep them open with no balance, which can affect your available credit and credit utilization). The new consolidation loan then becomes your single remaining debt with its own balance and payment.
If the rates you're offered aren't meaningfully better than your current debts (after accounting for fees and term), consolidation may not provide much benefit - in that case, the avalanche or snowball payoff methods on your existing debts (see our Debt Payoff Calculator) might be comparable. If you're struggling to manage payments regardless, a non-profit credit counselling agency can discuss debt management plans or other formal options.
No. Debt consolidation is a voluntary loan that pays off existing debts at (hopefully) better terms, with no impact beyond a normal loan on your credit report category. A consumer proposal is a formal legal process under Canada's insolvency laws, administered by a Licensed Insolvency Trustee, where creditors agree to accept less than the full amount owed - it has a significant impact on your credit report and is a more serious step, generally considered when consolidation and other options aren't feasible.
Disclaimer: The information, rates, and figures provided on this page are for educational and illustrative purposes only and do not constitute financial advice. Interest rates and payments used are examples only and do not represent your actual debts or any loan offer. This calculator does not account for fees, secured loan risks, or changes in spending behaviour after consolidation. If you are struggling with debt, consider contacting a non-profit credit counselling service or a Licensed Insolvency Trustee, and consult a qualified financial adviser for advice specific to your situation.