Skip links
A couple browsing the internet on their laptop

Debt relief options in Canada

If you’re looking for ways to fulfill your debt obligations but feel like it’s challenging to do on your own, you can consider some debt relief options. In Canada, there is a variety of solutions you can choose from so that you can eliminate your debt and reach your financial goals.

What is debt relief? 

Debt relief is a term referring to the approaches people take to manage or satisfy debt from multiple credit cards or loans. To help reduce the amount of debt, Canadians can look into debt services like debt settlement or debt consolidation loans.   

Sometimes, people need assistance managing outstanding balances and require additional debt solutions. If you know you’re reaching a point where repaying your loans and credit cards is challenging, you can satisfy your obligations by looking into debt relief plans.

A young man embracing his partner.

How does debt relief work? 

The main objective of debt relief strategies is to decrease your debt, which can be done in multiple ways. The following options will help you relieve some of the stress surrounding repaying debt and feel more confident about reaching your goals of becoming financially secure.  

Credit counselling 

A credit counselling agency provides services for Canadians who want advice rather than an immediate remedy. In a counselling session, a credit counsellor will review your financial situation and outstanding balances. They’ll usually help you develop a debt repayment strategy that works best for you and your goals. 

Credit counsellors may also recommend the best debt relief program according to your needs. If you enroll in a debt relief plan, they’ll continue to work alongside you.

Debt management 

The purpose of a debt management program is to provide a new solution to reducing your debt. Instead of only getting advice and recommendations for your situation, debt management services may also help to consolidate your outstanding debts. 

Debt management works by allowing you to pay one monthly payment towards debt management or credit counselling services. They may also help you to reduce the interest you pay so that most of your monthly payments go toward the principal you owe.  

Working with a debt management service is all done discreetly, meaning that collaborating with them will not reflect on your credit score. You get to maintain and even raise your score as long as you continue to adhere to your debt management plan.

Debt settlement 

The main service debt settlement companies offer is negotiation services. They help you reduce up to 80% of your debt, and the debt that gets eliminated isn’t fully repaid. You’ll still provide a lump sum to the creditor but not the full required amount.   

It’s important to remember that debt settlement doesn’t have guarantees and that creditors do not always agree to negotiations. Sometimes settlement companies give financial advice, but credit counselling and debt management services can provide more insight.  

Debt settlement may appear on your credit history and result in a drop in your credit score, but you gain the benefit of paying less towards your financial obligations.   

Consumer proposal

A consumer proposal is a legal agreement between you and your creditors that allows you to repay a part of the balance you owe. Only a licensed insolvency trustee (LIT) can arrange a consumer proposal because the proposal is a legally binding agreement.  

To file a consumer proposal, you’ll have to pay $750 and another $750 to proceed with a creditor. Creditors must also agree to the proposal, which allows you to repay the agreed portion for up to a maximum of five years.  

The proposal is an alternative to bankruptcy and is a better option between the two but can have a negative record on your public record. Choosing a consumer proposal indicates that some of your outstanding balances are not eligible for other debt relief programs.

Debt consolidation loan 

When you get a loan for consolidation, you receive a lump sum to repay your outstanding balances. You can find loans from a major financial institution, a credit union, or an alternative lender, each offering different interest rates and loan amounts. 

After you receive the funds, you can use them to repay multiple credit cards and loans, leaving you with one payment to focus on. Because you completely repay your debts rather than repay a portion or absolve them, consolidation loans have one of the better long-term effects on your credit score.  

Some lenders do not report to the credit bureau, so an additional loan won’t affect your credit score. Rather, the credit bureau will see you reduce your outstanding balances and increase your credit score to reflect your financial responsibility.

Benefits of debt relief plans 

Reducing the amount of outstanding debts and re-establishing control over your finances are some of the goals of debt relief. Not only will you have that when you find the right debt solution, but you’ll also experience the following.  

  • Less stress—being in a tight financial position can be stressful to the point where it can be hard to sleep at night. Even just knowing that there are solutions to excessive debt can be relieving.  
  • Save money on interest—with multiple financial obligations, the interest costs accumulate. If you relieve or settle some of your debt, the amount you pay towards interest also decreases.  
  • More affordability—in addition to saving on interest, debt solution services will help you find a new repayment plan that will help you manage your debt without stretching your finances.  
  • Faster repayment strategy—some debt management plans may help you find a monthly payment pattern that helps you get out of debt faster.  
  • Possible credit score increase—although some debt relief strategies will temporarily decrease your score, it also gives you the opportunity to build your credit rating again.  
  • Re-establish financial security—the most important advantage debt relief provides is the opportunity to start healthy financial habits.

Home equity loans for debt consolidation  

One option to help you consolidate is a home equity loan from Alpine Credits. If you have at least 25% equity in your home, you’re eligible for a loan that may have lower interest rates than your outstanding debts. You can determine how much equity you have by subtracting your outstanding mortgage balance from the appraised value of your home.  

You can borrow up to 75% of your home’s value, which can be more than enough to satisfy your financial obligations if you’ve built a lot of equity. You can access that value with the help of Alpine Credits, and the application process is simple. 

  1. Apply online—instead of asking you to provide your credit score or other details of your financial history, the application will ask for the appraised value of your home. Getting a home equity loan depends more on what your property offers.  
  2. Get approved—you’ll hear about your application within 24 hours. If you’re an eligible homeowner, you’ll be approved for a home equity loan. 
  3. Relieve your debt—not long after you get approved, you will receive the money in your bank account, and you can use it to cover your credit card balances and loans.  

Home equity loans are valuable financial tools, especially in debt consolidation. They have more flexible eligibility requirements than a bank or credit union while offering comparatively lower interest rates than unsecured loans.  

Contact a Financial Solutions Specialist at Alpine Credits to find out more about home equity loans. They can provide you with more details about the loan or the application process.

Apply now

Frequently asked questions

There are many debt relief options in Canada, but none are associated with the government of Canada. Debt settlement, consolidation loans, or consumer proposals are among some ways you can relieve your debt, and the right option fits different situations.

Official government debt relief programs aren’t available in Canada, and the most similar options to debt forgiveness are bankruptcy or consumer proposals. The government of Canada is more likely to provide debt resources rather than debt forgiveness.

Depending on the debt relief method you choose, it may momentarily negatively affect your credit report but has beneficial long-term effects  

Debt relief refers to multiple methods of satisfying debt, so qualifications will be different depending on what you choose.

Because debt settlement allows you or a representative to negotiate a lower payment, your credit score will decrease. It stays on your credit report for a few years. However, settling is better than leaving anything completely unpaid.