Debt Consolidation Loans in Canada - Simplify Your Debt
Spring offers debt consolidation loans ranging from $500 to $35,000. Rates start at just 9.99%, with loan terms from 6 months to 84 months. There’s no cost to apply, and the process is all completed online.
How Debt Consolidation Works, What It Costs, and How to Apply
What is a debt consolidation loan?
It’s a personal loan used to pay off your existing debt and consolidate it into a single monthly payment at a single interest rate. It can be used to pay off multiple debts, such as credit cards, payday loans, and lines of credit. It can even be used to pay down store financing. In most cases, your interest rate is going to be lower than most of your current rates.
What Types of Bad Credit Loans Are Available in Ontario?
Three main options for Ontario borrowers:
- Unsecured Personal Loans — These loans don’t require collateral and are available with terms ranging from 6 months to 84 months. For most Ontario borrowers with bad credit, this is the preferred option since it allows you to build your credit score as long as you make your payments on time.
- Secured Loans — These loans require an asset, such as a car or a house. Since there is collateral, it’s easier to get approved, and you will often get lower interest rates. When you don’t make your payments, the asset will be seized to cover the remaining balance.
- Payday Loans — These are short-term loans that often need to be repaid by your next payday. The approval is often very simple, but the interest rate is high at around 365%. There’s also no positive impact on your credit score, since no positive payments are reported.
Who Qualifies?
The cost of the loan will depend on the type of loan you take out, as well as the interest rate that you’re approved for. For personal loans intended for borrowers with bad credit, interest rates can range from 9.99% to 34.95%. Under Ontario law, the price for payday loans is around $14 per $100.
When you’re looking at a loan, what you really need to keep in mind is the APR. The APRs (Annual Percentage Rates) include all interest and fees, which is what you need to determine what the loan will cost annually.
Does applying affect my credit?
You might be surprised to learn that more people qualify for bad credit loans than you think. To qualify, you’re going to need to meet the qualifying criteria, including:
- Being of the age of majority
- Having a government-issued ID
- Having an active bank account in Canada
- Receiving a steady income
This income doesn’t have to come from traditional employment. It can also come from:
- Self-employment
- ODSP
- Ontario Works
- CPP
- OAS
- Pension
- Employment Insurance
Even if you have things negatively impacting your credit score, like a consumer proposal and bankruptcy, you can still get approved. While traditional lenders likely won’t help you, you could have pretty good chances with an alternative lender.
How Fast Can You Get Your Loan Funds?
Online lenders can fund your loan the same day; however, this depends on verification. Realistically, most approved loan applications are funded within 1–2 business days.
Will applying affect your credit score?
Applying for a loan won’t affect your credit score with most reputable lenders because a soft credit check is used to determine your eligibility. Soft credit checks don’t show up on your credit report. A hard credit check is only done if you decide to proceed with the loan after your initial approval, and the lender will need your consent to run it.
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Spring Financial vs. Other Debt Consolidation Options
Bank / Credit Union
Debt Management Program
Payday loans
- Credit score required
- All credit scores are considered
- Typically 660+
- Not required
- Not required
- Collateral required
- No
- Sometimes
- No
- No
- Rate range
- No
- 7%–20%+
- Negotiated (often 0%)
- The debt is reduced
- Impact on credit
- 9.99%–34.95%
- Positive with on-time payments
-
Added to your
credit file
- Stays on your report for 3 years from completion
- Funds in your account
- Positive with on-time payments
- Days to weeks
- N/A
- N/A
- Debt forgiven
- Yes
- No
- No
-
Yes, anywhere from
30% to 80%
- Application online
- Yes
- Varies
- Completed through a credit counsellor
- Completed through a Licensed Insolvency Trustee
Why the difference matters
When you have less-than-perfect credit, traditional borrowing options can be limited. Banks and credit unions typically look for higher credit scores, while debt management programs and payday loans work differently and may not provide funds directly to your account.
With a Spring Financial personal loan, all credit scores are considered, no collateral is required, and approved funds can be deposited directly into your account as soon as the same day.
Making your payments on time can also have a positive impact on your credit, giving you an opportunity to access the funds you need while building a stronger credit history.
All credit scores
are considered
As soon as the same day
Funds in your account
Ready to Apply? Here’s Exactly What to Expect
If you meet these basic requirements, there’s a Spring product waiting for you.
Three steps:
Complete the online application.
From start to finish, the application takes just a few minutes to complete. You will need to provide documentation to confirm your income, identity, and current debts.
Our team reviews your application
In addition to the initial documents required, you may also be asked to provide additional documentation. This is all done digitally, right from your device.
Receive your funds.
Once the process is completed and you have received approval, then the funds will be deposited as soon as the same day, though funds are typically received within 1-2 business days.
To be eligible, you need to:
Be the age of majority in your province or territory
Have a valid government-issued photo ID
Have an active Canadian bank account
Have a steady source of income (employment, self-employment, CPP, OAS, disability benefits, pensions, ODSP, Ontario Works, or certain types of EI)
No Impact to Your Credit Score
Trusted by Hundreds of Thousands of Canadians
Over one million applications received | Founded 2014 | Reports to Equifax & TransUnion
I was able to get a loan against all odds with a young credit history, high credit utilization, and a low bank balance. I was approved when I needed it most. Their process was smooth and professional. I’m truly grateful!
Emmanuel · Toronto, ON
“I was in need of emergency financial assistance, and Spring assisted me with funds in record breaking time, they gave me an affordable repayment plan. I am so grateful to them and would recommend you give them a try.”
Bobby · Calgary, AB
“Spring Financial deserves every bit of praise I can give them. After being turned down by multiple banks and feeling completely defeated, Spring Financial gave me hope when I had none. Highly recommend.”
Don · Winnipeg, MB
“They made it very easy to get the loan I was looking for. They are very courteous, professional, and communication was very good. They made sure I understood all terms and options. I can’t recommend them enough.”
Andrew · Vancouver, BC
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Contents
What Debts Can I Consolidate with a Spring Financial Loan?
Personal loans from Spring Financial can be used for almost anything you like. A popular use is paying off unsecured debts like:
- Credit cards: These are the most common type of high-interest debt and are a perfect candidate for consolidation.
- Payday loans: The cost of payday loans can cause you to get caught in a payday loan cycle. Taking out a personal loan at a reduced rate can break this cycle.
- Lines of credit: lines of credit can hold high interest rates and be difficult to pay off since they’re revolving.
- Buy-now-pay-later balance/ store financing: Once promotional rates have ended, interest rates on these types of financing can add up quickly making them a good option for consolidation.
- Other personal loans: Rates on personal loans can vary. Paying off a high interest loan with a lower interest personal loan can save you thousands over the course of the loan.
In general, unsecured debts are a prime candidate for consolidation. Secured loans, like mortgages and car loans, are less commonly consolidated with personal loans. Student loans aren’t usually a good candidate because they have lower rates than a standard personal loan.
Debt Consolidation Bad Credit Canada: What Are Your Options?
Traditional lenders, like banks and credit unions, like you to have a credit score of 660 or higher before they start offering you the most competitive rates on consolidation loans. You can still get a loan with a lower credit score, but you may get a lower loan amount and a higher interest rate.
Spring Financial is different from the banks in the sense that they will consider applications from borrowers with all credit types. Eligibility is determined by other factors like income, existing financial obligations, the overall affordability of the loan, as well as your credit score. If you do have a lower score, though, you should be aware you could have a higher interest rate.
If you do have a bad credit consolidation application, there are some things that can help.
- Stable income: This includes income from employment, pension, disability benefits, ODSP, Ontario Works, and certain types of Employment Insurance.
- A manageable debt-to-income ratio: Having a debt-to-income ratio of 40% or lower is an ideal ratio to lenders.
- A co-signer: While having a co-signer is not required, it can help your application, especially if the co-applicant has a higher credit score. They’re also taking on a portion of the responsibility of the loan, which can provide more reassurance to the lender.
Even if you have a bad-credit score, it can still be worth it to apply. There’s no cost to apply, and there’s no impact on your credit score. However, if you do get the loan, you can see a credit score increase in 6 to 12 months.
Finding the Best Consolidation Loan
When choosing a consolidation loan, the best option is one that is lower than your current interest rates. These are the key things to look for.
Interest rates and APRs: These will determine whether your interest rate is lower or not. Your interest rate is fairly self explanatory, but the APR is your interest rate with all extra fees and charges. You can use this to determine your savings if you choose the loan.
Fixed Vs variable rates: Personal loans with Spring Financial all have a fixed interest rate. This means the rate given to you at approval will stay for the entirety of your repayment period. This is also great when you’re on a fixed budget, because your monthly payment won’t change.
Loan Term: With personal loans, the longer the loan term, the smaller your payments will be. However, you will have to pay more interest. If you have a loan of $10,000 with a rate of 14.99%, you’re going to have a larger payment if you have a 36 month term but you will pay less interest. A 84 month term will charge more interest, but have a smaller monthly payment.
Prepayment options: Spring Financial offers open loans, meaning that you can pay them off early or make extra payments at any time with no prepayment penalties. Doing this will decrease the total interest you owe and shorten the life of your loan.
Approval speed: The approval time of a personal loan can vary based on the lender. Spring Financial can get you your funds as soon as the same day.
Unsecured vs. secured: With an unsecured loan, no collateral is needed. Spring Financial offers unsecured loans so you don’t have to leverage an asset in order to get a loan.
Getting a Debt Consolidation Loan in Ontario, BC, and Alberta
Spring Financial offers personal loans all throughout Canada, including in Ontario, British Columbia and Alberta. These are some of the most in demand provinces, currently, for debt consolidation loans.
Ontario: Being one of the largest provinces in Canada, Ontario also has some of the highest household debt levels in the country. Spring Financial takes a wide variety of income sources, including ODSP and Ontario Works, making them a good candidate for debt consolidation loans.
British Columbia: In BC, personal loans are available online through the province with Spring. Residents can access anywhere from $500 to $35,000 for a personal loan.
Alberta: Just like the other provinces, Spring offers online personal loans in Alberta. With rates starting at just 9.99%, you can apply online in just minutes.
Does Consolidating Help or Hurt Your Credit Score?
What damages credit after consolidation: running balances back up on the cards you just paid off. That’s the single most common post-consolidation mistake. Some people pay off three credit cards, only to accumulate three new balances within a year. Closing the cards you no longer need, or lowering their limits, removes that temptation.
Long term, a debt consolidation loan can improve your credit long term, but you may notice a temporary dip at the beginning. The positive impact comes from the changes made to your credit file when the loan is opened.
- The new loan shows on your credit report as a new account
- The debts you consolidated show as paid off on your report
- Your credit utilization ratio drops, which increases your credit score
You may notice a temporary decrease at first, though, which is normal. Once you start making on-time payments, Spring reports those to bother Equifax and TransUnion. If you make these payments consistently, you should see an increase in your credit score after around 6 months.
Your credit score can be damaged, though, if you start using the credit cards that you just paid off. Closing these cards once they’re paid off can help you avoid this problem.
What Can You Actually Use the Money For?
When unexpected expenses occur, $5,000 can cover a lot and come in very handy. Some of the most common reasons you may need this much include:
- Car Repairs: Transmission or engine repairs can easily cost between $3,000 and $5,000. Without a vehicle, your employment can be at risk, so fixing it ASAP is often necessary.
- Home Emergencies: A failed furnace, water heater, or even a roof repair can easily cost upwards of $5,000, and they need to be repaired ASAP.
- Medical or Dental Costs: Costs that aren’t covered by provincial health plans can be quite costly, but often have to be done. A personal loan can make that cost more manageable.
- Down Payment: Using a $5,000 personal loan as a down payment on a used car from a private seller or a dealership is another great option.
- Debt Consolidation: By using a $5,000 loan to roll all of your monthly payments into one, you can simplify your budget and even save some money by reducing how much you pay in interest.
With Spring Financial, your personal loan funds can be used for whatever you like; there are no restrictions.
Debt Consolidation vs. Consumer Proposal vs. Bankruptcy in Canada
While all of these options allow you to deal with your debt, they don’t all work the same. Here’s a look at how they differ.
Debt Consolidation Loan
With debt consolidation loans, you’re just restructuring your debt. You’ll still owe the same amount, but you can make your payments more manageable and reduce your credit score. You don’t have to start any legal process with this method, and you will have a new loan as well as paid off accounts in your credit history.
For someone who has stable income and a manageable debt amount, this is a great option. If you can get a better interest rate then your current rate, it might be your best best.
Consumer Proposal
A consumer proposal is much different than a debt consolidation loan. It’s a legal agreement that you have to file through a Licensed Insolvency Trustee. Your debt will then be negotiated so you only have to repay a portion of your debt. Lenders agree to this because they’re likely to recoup more of their money this way then they are with bankruptcy.
The downside to a consumer proposal is that it stays on your credit file for 3 years after completion. It’s considered a form of insolvency proceedings on your credit report, and is different from a traditional missed payment. It doesn’t stop you from applying for new debt, but it can affect how your application is perceived by lenders.
While this isn’t the most recommended option, and isn’t for everyone. It is an option for those with large amounts of debt they’ll have a hard time paying off. Typically for amounts between $10,000 and $250,000.
Personal Bankruptcy
Bankruptcy is another legal process, however, it allows you to discharge most unsecured debts. For this process, you do have to surrender non-exempt assets, attend financial counseling sessions, and duties to complete that are assigned by a trustee. The typical first bankruptcy will last 9 months, but it can be longer depending on your circumstances like your income exceeding the threshold that’s set by the Office of the Superintendent of Bankruptcy.
Bankruptcy should only be considered if there’s no realistic way of you being able to pay your debt back. It stays on your credit file for 6 years after you’re discharged with Equifax, and 7 years with TransUnion. This means it has the most significant impact on your credit report out of the three options.
The practical decision framework:
Your situation | Best fit |
Having a steady income, manageable amount of debt, and a credit score of 600 or more. | Debt consolidation loan |
Having a higher debt load where a smaller debt amount is more realistic. | Consumer proposal |
Having overwhelming debt with no income or assets. | Bankruptcy |
Having debt that’s mainly credit cards or high interest debt, and any credit score | Spring Financial — applies across credit profiles |
Secured vs. Unsecured: How to Get the Lowest Rate on a Consolidation Loan in Canada
In terms of interest rates, secured loans will offer the lowest debt consolidation rates. The most common type is a home equity loan or Home Equity Line of Credit (HELOCS) which have standard rates of prime plus 0.5% to 1%. Depending on the Bank of Canada rate, you should have a rate between 5% and 7%. Since it’s secured, though, you could lose the property if you’re unable to make your payments.
Unsecured personal loans don’t require collateral. If you have a credit score of 660 or higher, you can get a rate of 7% or higher. That said, if you choose to go with an alternative lender like Spring, you have access to rates ranging from 9.99% to 34.95%.
Which type of loan is better really just depends on your situation. If you own a home, a HELOC could be a great option but it can be risky with credit card debt. If you start spending on the cards again while still paying off the HELOC, you risk having to much debt to handle. With a personal loan, you have a fixed payment with a fixed end date which can be easier to pay off. If you don’t have collateral then a personal loan is your best option.
How to Speed Up Your Loan Approval and Get Funded Faster
When it comes to getting a loan approval, the biggest delay in the process is documentation. Being prepared can greatly reduce your approval time. Things you should have on hand include:
- Your most recent pay stub or proof of income
- Your bank account information
- Government-issued photo ID
- The balances and lenders of the debt you want to pay off
With Spring Financial, the loan process is entirely online. As soon as you submit your application, the review process begins. If all of your documents are submitted immediately and verified, you can get your funds as soon as today. However, most will get their funds within 1-2 business day.
Do No Credit Check Loans Exist in Canada?
Actual no credit check loans aren’t offered by legitimate lenders in Canada. Any lender offering a no credit check loan is an immediate red flag and should be avoided.
In practice, most lenders like Spring Financial start with a soft inquiry of your credit report. This won’t impact your credit score and will let the lender know if they can give you a pre-approval or not. If you choose to proceed with the loan, then a hard credit inquiry may be required. You will have to give consent for a hard credit check.
Other red flags to watch for are if a lender advertises a “guaranteed approval with no credit check” loan or won’t show you the loan details before you commit. Spring Finanical will disclose all aspects of the loan to you before you commit.
How to Use a Debt Consolidation Calculator Before You Apply
Before you apply for a debt consolidation loan, you should know whether or not it will save you money. With a debt consolidation calculator, you can input your current balances, rates and payment amounts and compare it to the loan.
The things you should pay attention to are:
- Total interest paid
- Monthly payment differences
- Payoff dates
The only thing the calculator won’t show is if you keep using your cards after you pay them off. If you accumulate new balances, consolidating your debt can actually cost you more.
6 Signs You’re in the Right Situation for a Debt Consolidation Loan
While a consolidation loan may not work for everyone, there are a few indicators it may be the best option for you.
- You’re making minimum payments on multiple credit cards
- You’re carrying more than $5,000 in high-interest unsecured debt
- You’re using one credit card to cover payments on another
- You’ve taken out payday loans to make ends meet between paycheques
- You’re getting collection calls or are close to missing payments
- You don’t know the total of what you owe
If this is you, then a consolidation loan can allow you to stretch your money further. More of your payments will go towards the principal instead of interest. You’ll find it can save your thousands and reduce your total payment time by years.
Does Spring Financial Work with Credit Counselling Agencies?
Spring Financial is a lender, and doesn’t work with credit counselling agencies. These agencies are non-profit services that are able to negotiate with creditors on your behalf and even create a debt management program for you. Spring offers financial products in order to help you navigate different stages of financial difficulties.
You have questions,
we have answers.
How does debt consolidation work in Canada?
It allows you to borrow one lump sum and use that to pay off your existing debts. You can reduce your multiple monthly payments to just one with a single monthly payment to one lender. You can also pay less interest if the loan has a lower interest rate than your other debts.
Will a debt consolidation loan hurt my credit score?
Applying for a loan with Spring won’t hurt your credit score. You may notice a small dip when you open a new loan, but the long term effects depend on whether or not you make your payments. On time payments can improve your credit score.
What is the difference between debt consolidation and a consumer proposal?
With a debt consolidation loan, all you’re doing is restructuring your debt. A consumer proposal is a legal process that allows you to only pay a portion of what you owe over a period of up to 5 years. They involve using a Licensed Insolvency Trustee and can damage your credit file for 3 years after completion.
Can I consolidate debt in Canada with bad credit?
Yes, Spring Financial will consider an application from those with all credit scores. There are other factors that affect eligibility including income, affordability, and financial obligations.
How much can I save per month by consolidating my debt?
How much you can save will vary depending on your current rates and the new rate you qualify for. Higher debt balances and larger rate differences will result in higher savings amounts.
Is debt consolidation better than bankruptcy in Canada?
For most, debt consolidation is better because it doesn’t hurt your credit score. You also don’t have to surrender your assets and there’s no legal process involved.
Can I consolidate payday loans with a personal loan?
Yes. With payday loans costing $14 pre $100 in Ontario, a personal loan can pay these off and get you out of a payday loan cycle.
What credit score do I need to get a debt consolidation loan in Canada?
There’s no minimum credit score required for a personal loan with Spring. Each application is assessed individually using multiple factors.
What debts can I consolidate with a Spring Financial loan?
You can consolidate most unsecured debts with credit cards, payday loans, and personal lines of credit being the prime candidates for consolidation.
Does Spring Financial work with credit counselling agencies?
No. Spring Financial is a lender. Credit counselling agencies work with those who need legal
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