Short answer: in Canada you can consolidate debt five ways: an unsecured consolidation loan from a bank or credit union, a home equity line of credit (HELOC) or mortgage refinance, a balance transfer card, a debt management program through a non-profit credit counsellor, or a consumer proposal filed by a Licensed Insolvency Trustee. Banks usually want a credit score of about 650–680 or higher and a total debt service ratio no higher than 40%–44%, and often pay your creditors directly. A HELOC is cheaper, typically prime plus 0.5% to 1% with big-bank prime at 4.45% in October 2026, but it turns unsecured debt into debt secured on your home. If you are already insolvent, a consumer proposal can cut what you owe, at the cost of a mark on your credit report.
CADC1312Below: each option compared, what banks look for, the HELOC rules and risks, debt management programs versus consumer proposals, and how to avoid costly debt settlement firms.
Your consolidation options
| Option | Who offers it | Main requirement |
|---|---|---|
| Consolidation loan | Banks, credit unions, online lenders | Credit score around 650–680+, steady income, TDS within 40%–44% |
| HELOC or mortgage refinance | Banks and mortgage lenders | Home equity; HELOC limited to 65% of home value, 80% combined with the mortgage |
| Balance transfer card | Card issuers | Good credit, usually 660+, for low promotional rates |
| Debt management program | Non-profit credit counselling agencies | Steady income to repay 100% of unsecured principal; no minimum score |
| Consumer proposal | Licensed Insolvency Trustees only | Insolvency and unsecured debt under $250,000, excluding a principal residence mortgage |
What a consolidation loan can save
Unsecured consolidation loans typically range from about $1,000 to $35,000–$50,000 over one to five years with fixed payments. To show the effect, take $20,000 of card debt repaid over five years:
At 21% the payment is about $541 a month and interest about $12,464; at 10% it is about $425 a month and about $5,496. The rates are illustrative and the figures are our own calculation. Savings only last if you stop using the cards you paid off. Check where your credit stands first with our guide to credit scores in Canada.
HELOC: cheaper, but your home is on the line
- Limits: under OSFI's guideline, the revolving HELOC portion can be at most 65% of the home's value, and the HELOC plus mortgage at most 80%.
- Rate: variable, typically prime plus 0.5% to 1%; it moves with the Bank of Canada.
- Risks: unsecured debt becomes a lien on your home, minimum payments can be interest only so the balance never falls, and secured debt cannot be reduced in a consumer proposal unless you give up the property.
Debt management program or consumer proposal
| Debt management program | Consumer proposal | |
|---|---|---|
| Run by | Non-profit credit counselling agency | Licensed Insolvency Trustee |
| What you repay | 100% of principal, with interest reduced or eliminated | A negotiated portion of what you owe |
| Legal protection | None; voluntary for creditors | Immediate stay of proceedings against collection and garnishment |
| Maximum length | Usually up to 5 years | Up to 5 years |
| Credit report | R7 rating, removed about 2–3 years after completion | R7 rating, removed 3 years after completion or 6 years from filing, whichever comes first |
Avoid debt settlement traps
Debt settlement companies are not licensed insolvency professionals and cannot stop lawsuits or wage garnishments. Provincial rules limit them: in Ontario, the Collection and Debt Settlement Services Act bars them from charging fees before reaching an agreement with your creditors, apart from a small setup fee. Only a Licensed Insolvency Trustee can file a consumer proposal. Remember that no lender in Canada can charge more than the 35% APR criminal rate, fees included, which we also explain in our car finance guide.
The Bank of Canada left its overnight rate at 2.25% on September 2, 2026, the seventh straight hold, so big-bank prime stays at 4.45% as of October 2026. That is the benchmark behind the variable pricing on a HELOC or line of credit, which typically runs from about 4.95% to 5.45% today. Markets, however, now price a meaningful chance of a hike at the October 28, 2026 decision and a near-certain move by December 9, 2026, per nesto.ca. On a $20,000 variable-rate balance, even one quarter-point rise adds roughly $4 a month; the point is that a prime-plus product is not locked in.
Two data points argue for acting early. First, CAIRP reported 37,523 consumer insolvencies in Q2 2026, up 6.9% year over year and the highest quarterly total since 2009. Second, an Equifax Canada survey released August 6, 2026 found that almost 1 in 4 Canadians expect to pay only the minimum on their credit cards. If you are weighing a debt management program, its fees are capped in Ontario at $50 to set up and 15% of monthly payments, per Steps to Justice. A consumer proposal carries a regulated OSB filing fee of $123.17 as of 2026. Check the credit score guide before you apply; for anyone with a car loan in the mix, unsecured loan options show what a bank will actually price.
Choosing the right route
If your credit is good, compare a consolidation loan with a balance transfer card. If you own a home and have discipline, a HELOC can be cheapest, but only with a firm repayment plan. If payments are already unmanageable, talk to a non-profit credit counsellor and, if you are insolvent, a Licensed Insolvency Trustee before signing with any settlement company.
Before you sign anything, confirm two dates. First, the Bank of Canada's next decision on October 28, 2026; if you are choosing a variable HELOC or line of credit, ask the lender for the monthly payment at prime plus one point above today's 4.45%, so a hike does not surprise you. Second, if your mortgage renews between late 2026 and mid-2027, get a renewal quote now, since Bank of Canada analysis suggests roughly 4% of borrowers nationally and about 9% in the Toronto area may not qualify to switch lenders under tighter debt service ratios. Gather your TDS calculation and payoff plan before applying, and treat any variable-rate consolidation as a rate-exposed product, not a fixed cost.