Unsecured Debt Consolidation Loans in Canada 101

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When you take out a loan, sometimes, you may find it hard to pay off. In fact, only 25 percent of Canadians pay off their credit card debt in full each month.  This is especially true for people who take out a loan without much thought or analysis.

If you hope to live a debt-free life, one solution could be to adopt the debt consolidation strategy. As a part of this strategy, you can gather all the debts into one place, get a better interest rate or lower the overall term of the loan. If either or more of this happens, you end up making the payments affordable, re-establish the credit history you might have ruined before and live a debt-free life.

What is an Unsecured Debt Consolidation Loan?

An unsecured debt consolidation loan is a type of loan in which you combine different personal loans into a single loan. To be eligible for this type of loan, you need to have a proof of income, a good credit rating and a notice of assessment form.

Getting a debt consolidation loan without a good or fair credit score is quite difficult. Most banks would not allow it. In such cases, you can turn to private lenders who charge a higher interest rate to compensate for the risk they take by trusting you.

The exact opposite of an unsecured debt consolidation loan is a secure debt consolidation loan. In this loan, a borrower has to keep an asset as security with the lender. The asset can be anything from a home to a car. In such a scenario, the lender may sell off the asset if a person doesn’t pay back the loan in time. Hence, the interest rates are lower for such loans.

Reasons Why Banks Decline Unsecured Debt Consolidation Loans

The most obvious choice when it comes to seeking a loan for most people is a bank. If you are hoping to get consolidation loans from a bank and you don’t want the application to get rejected, you should read on. Here, we have mentioned a few common reasons why banks decline unsecured debt consolidation loans.

  • No Security for a Loan

Most banks want you to offer collateral when you seek a loan. If you don’t have collateral to offer, you can opt for unsecured consolidation loans.

The fee of processing these loans and the interest rates are very high. Most of the installments you offer would mostly comprise of the interest, and only a small amount would go towards the principal. Hence, you will need to pay a lot of money over time to pay off the principal.

  • Not Enough Income for Debt Consolidation

Income of a person is a key criterion when it comes to consolidation loans. As most of this type of loans need to be paid in just 3 or 5 years, the income of an individual should be high enough to be able to do that. In case the bank thinks that your income is not sufficient, the loan might be denied.

  • Low Credit Score

When you want to opt for debt consolidation Canada, make sure that you have a good credit score. People who have a low credit score or a bad credit report may be rejected by a bank.

Even people who haven’t got a long credit history because they are new in Canada or they haven’t been using credit in their name could be denied the opportunity of debt consolidation Canada. The reason for this is that it takes time to build a good credit history.

  • Excessive Amounts of Debt

The opportunity of debt consolidation Canada can also be denied to individuals who already have a lot of debt in their name. A basic rule of thumb is that a bank would allow you only 40 percent of loan out of your gross annual income. When all the loans you have taken are put together, and they are already more than the 40 percent limit, it is likely that the bank would deny the loan or decline your loan application.

What to Do When a Bank Denies Your Loan?

When you need debt help, and your bank has denied to help you, you should consider visiting loansgeeks.com. It is an awesome website that would just need some basic data and provide you with a list of lenders who can help you. This list would be highly relevant and personalized according to your needs. Hence, you end up saving time while getting the best debt help possible.

Debt Consolidation Loan Providers in Canada

NameInterest RateLoan AmountLoan TermWebsite
5.9% to 45.9% (Varies by province)$2,000 to $35,0002 to 5 yearsVisit Website
19.99-33.99%$500 - $30,0006–120 monthsVisit Website
5.99% - 29.19%$1,000 to $35,0003 or 5 yearsVisit Website
12.99% – 39.99% $500-$10000Up to 3 yearsVisit Website
35.99%Contact the LenderContact the LenderVisit Website

SkyCap Financial

This website has been helping people to get money on time since 2013. The alternative financing options it offers include credit consolidation assistance. This lender considers people to be more than what their credit history says about them.

The lending experience offered by this company is also quite simple and smooth. You just need to fill an application and you’ll get a quick decision. There will be no long wait times when it comes to credit consolidation assistance. The company understands the pressure you might be feeling.

Credit Canada

If you are among those individuals who want a stress-free life, you should consider the credit card consolidation loans offered by this lender. The company has hired credit counselors to help people make smarter financial decisions.

You can start trusting this lender by opting for a free assessment. It will enlighten you and help build trust. The lender always strives towards offering credit card consolidation loans so that you can have a single debt payment and lower the interest costs.

Borrowell

In case you want to trust a lender for credit card consolidation who is trusted by thousands of Canadians then you can’t go wrong with this lender. The lender provides unsecured personal loans for up to an amount of $35,000, and the APR starts at just 5.99 percent.

This lender is also suggested for people who want low-interest rates and want to save money on interest payments. The process of application is online and super easy. It also doesn’t charge any prepayment fees and protects customers’ data by using quality encryption used by banks.

Fairstone

When you want to know about unsecured loans provided by a non-bank lender, this is a good website. The lender is famous for offering affordable secured and unsecured loans. If you have a fair credit score, your chances of getting approved by this lender are higher at this lender than the bank.

The lender has more than 225 branches in Canada. It means that you can get a loan offline if you are not too fond of online methods. The company has been into existence since 1923 and wants to help the community by offering secured and unsecured loans to those in need.

Mogo

While researching debt consolidation companies, you should consider this lender. It offers a stress-free mortgage with loads of add on features. Some of the features are payment reminders, progress trackers, low rates, etc.

The lender also offers rewards to those people who make the payments on time. It is one of those debt consolidation companies that care for customers. It devises solutions that improve your financial condition. You can trust this lender among debt consolidation companies because it offers transparency and doesn’t opt for unethical strategies like hidden fees.

How to Qualify for a Debt Consolidation Loan with Bad Credit?

The question of debt consolidation loans bad credit haunts many people who want debt consolidation but don’t have an excellent credit score. If you are among those people, you should stop worrying about debt consolidation loans with bad credit and learn about credit scores.

You should know that people who have a credit score of 750 or above fall into the excellent category. People who have a credit score between 700 to 749 are categorized as good. Similarly, people who have a credit score of 650 to 699 are a part of the fair category. People who have a credit score of 550 to 649 fall under the below average category while those with a credit score of 550 and below are said to have bad credit.

If you fall under the bad credit category and you want to know how to get debt consolidation loans bad credit, then the answer is right here. You should start by checking with your local bank where you are a customer. Most banks would consider your relationship with the bank while approving a loan so it is likely that your loan might be passed even if you have a bad credit history.

In case the bank has rejected your request, you can then seek private lenders who offer to consolidate credit card debt. These lenders would usually charge a fee or high-interest rate to consolidate credit card debt. So, before you trust anyone who claims to consolidate credit card debt with bad credit history, make sure you seek loans that have no hidden charges or early prepayment penalties.

Is Debt Consolidation Loan Bad for Your Credit Score?

Many people think that unsecured debt consolidation loans Canada are not a good choice as they can harm their credit score. This is not altogether right.

If you are seeking unsecured debt consolidation loans Canada, you should know that these loans usually help you to re-establish credit. The unsecured debt consolidation loans Canada have affordable monthly payments and lower interest rates. This means that you will be able to pay a loan faster and hence improve your credit score.

Also, when you need to pay only one credit card consolidation loan rather than a few, it is likely that you won’t miss or skip a payment. When you make timely payments consistently, it will also boost your credit score.

If you think that remembering to pay a loan installment is too much of a bother, you can opt for a credit card consolidation loan that comes with automatic payments.

If you opt for a credit card consolidation loan with automated payments, you won’t even have to sign a cheque or transfer money via internet banking as the money would be deducted on the same day and time every month. This will ensure that your loan installments don’t pile up and ruin your credit score again.

Why Take Out an Unsecured Debt Consolidation Loan? 10 Reasons

Though unsecured loans Canada are gaining a lot of popularity these days, many people still wonder why they are a good option. Here you can know 10 reasons why take out an unsecured debt consolidation loan. By the time you read all the reasons, you will agree that unsecured loans Canada can be worth it!

  1. When you opt for unsecured loans Canada, you will need to take care of only one easy bill.
  2. You will also be saved from the non-stop calls from the collection agency, which can be a headache.
  3. If you select a good one among debt consolidation programs, you might improve your credit score.
  4. Improved credit score would allow you to get a loan faster later in life.
  5. You can consolidate different varieties of loans when you choose the right debt consolidation programs. Some examples are automobile payments, personal loans and credit card debt, school or educational expenses, etc.
  6. You are saved from several additional charges when you select the right one among debt consolidation programs.
  7. When you consolidate different loans like unsecured personal loan and credit card loan, you don’t have to maintain multiple loan accounts.
  8. Similarly, you don’t have to pay a different amount to every unsecured personal loan you have. You just need to make one payment.
  9. The repayment time of consolidated loans is shorter than single loan options like unsecured personal loan.
  10. The repayment terms are safer as you are not risking a valuable asset (which is the case with secured loans).

Final Words

In essence, it can be said that consolidation loans are worth consideration for people who want to be debt-free and need help. The process of debt consolidation is easier than ever and finding lenders who offer a favorable debt consolidation loan is also simple. You just need to do some basic research, and you’ll get a loan that suits your needs perfectly.

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