This is an ambiguous term with different meaning depending on what the situation is, who is involved and the expected outcome. When referring to a financial decision, it is often misconstrued by people.

If you are battling with various monthly debt servicing payments, it is likely that you want your bill payments to be simpler. This usually means combining your payments to minimize stress and complexity.You might be looking for an aggressive way of solving your debt once and for all.


The following are the various forms which debt consolidation can take and how you can use them in a difficult financial situation.

Traditional Consolidation:

Usually debt consolidation refers to a lending situation whereby you borrow an amount of money in a bid to service your debt so as to put your debt into one loan. This shifts your debt because any loan you take will attract interest and principal which has to be repaid on some terms. You still have your debt but you have simplified it by paying it to one lender. The simplicity is the benefit.

This can be helpful for persons who are battling with using their income to balance their bills.  In theory, budgeting is easier because it reduces your expenses.

Another advantage of a consolidation loan is that the interest rate is most times significantly lower. This makes it easier to make meaningful progress in paying a loan faster than would be possible with a combined higher interest rate.

Debt Consolidation Program By Means Of A Debt Settlement Program

Debt consolidation services are offered by a number of companies in Canada. This is done by compiling some of your debt into a single payment to their company. This is a payment plan negotiated with the creditors involved. These companies are not licensed; they only make promises of negotiations which are not legally binding on the creditors. It is debt consolidation solely for creditors who are willing to agree to the deal.

There is also Debt Consolidation Toronto in Canada which offers to dramatically reduce your debt through a new government program in which you make one monthly payment to all your creditors at a much reduced amount.

Debt Consolidation with a Consumer Proposal

This is the most effective way of consolidating your debts. It is a popular and viable alternative to filing for bankruptcy. A proposal is a grand way to take advantage of shortage of cash to shed off unsecured debt in a short amount of time.With a proposal, you can make one monthly payment with no interest with a substantially reduced principal. Usually, creditors will agree to a maximum of 80% reduction in principal. The other benefits of a proposal include:

  • It is legally binding
  • There is no reporting of income
  • There is no loan
  • Freedom to buy and sell assets
  • You maintain possession of all your assets
  • Fully open terms.

During the proposal, you will be required to give up your lines of credit and unsecured credit cards to prevent incurring more debt as you clear out your existing debt.