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What is a consolidation loan in Canada?

A consolidation loan lets you combine multiple outstanding balances, including credit card charges, a car loan, or student loans. You can consolidate them all by taking out a new loan to pay off other financial obligations. Around 15.75% of Canadians use personal loans to consolidate because they have a comparatively lower interest rate than all other loans combined. 

Despite their name, they are like regular personal loans, and you can even apply for a personal loan and use it to consolidate debt. The same is true for home equity loans; they can be used towards your financial responsibilities despite not being specifically for debt consolidation.

Learn more: What debt consolidation and how does it work

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How does a consolidation loan work in Canada?

You can get a consolidation loan from banks, credit unions, or alternative lenders. Essentially, you take out a new loan that covers your outstanding bills, like credit cards or personal loans. Borrowers can use these funds to pay off their credit card balance ultimately.   

Once you consolidate, you are left with only one monthly payment. This may help you manage your finances better and reduce the stress of multiple regular payments. For a consolidation loan, you should determine what interest rates, monthly payments, and fees you can afford. 

Case study of a consolidation loan with Alpine Credits  

Alpine Credits has been helping Canadians with some of their financial obligations for decades, and one instance is with Milly S.  

While Milly was not in the most stressful situation, she wanted to change her financial situation. She had a few credit cards while still paying her student loans and financing her car. The payments were challenging to maintain, and she knew she had to find a new solution.  

As Milly was browsing through different debt relief options, she chose Alpine Credits because they had responded to her quickly, provided lots of useful information and had the most accommodating eligibility criteria. Milly knew she had at least 25% equity in her home because she had lived there with her spouse for over ten years.  

After she contacted Alpine Credits and was approved for her home equity loan, Milly received the funds that would allow her to repay her outstanding credit card balances and loans. The interest was lower than all her previous obligations, which made managing her finances easier with a single monthly payment that was smaller than her other payments combined. She focused on repaying her home equity loan over the next two years and was able to increase her credit score and build healthier financial habits. 

Home equity consolidation loans at Alpine Credits 

Consolidating your credit charges and bills can be a simple process, but major financial institutions have high expectations, even for those trying to improve their financial situation. If you’re a homeowner, you can use your home equity as a loan by collaborating with Alpine Credits. 

Alpine Credits helps Canadians access their home equity as a lump sum they can use for any reason, including home renovation, business investment, and loan consolidation. Many borrowers use a home equity loan instead of specialized consolidation loan because they tend to be more flexible.  

By subtracting your outstanding mortgage balance from the appraised value of your home, you can determine how much equity you have. The longer you’ve lived in your home, the more likely it is that you will have built up more equity, meaning you may be able to borrow a larger amount. With Alpine Credits, you can borrow up to 75% of your home equity, reaching values that can cover most, if not all, of your obligations.

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How to get an online consolidation loan with Alpine Credits 

Alpine Credits processes applications faster than traditional financial institutions, letting you access your funds sooner rather than later.  

  1. Apply online—Alpine Credits makes the application process simple. You need to provide some identification and your house’s appraised value. 
  2. Hear back in less than 24 hours—if you have at least 25% of your property’s value paid off, you’ll be eligible for a home equity loan from Alpine Credits. 
  3. Receive the money—Once approved, the funds will be deposited into your bank account, usually within the week of your application.  
  4. You only need to own your home or other real estate to qualify for a home equity loan. Traditional banks look at factors such as your age, income, and credit history to approve you for a loan. As an alternative lender, Alpine Credits offers a different opportunity by focusing on the equity you have in your property. The process is simplified and accessible to anyone who owns their home. 

Alpine Credits has a team of Financial Solutions Specialists who can help you along your journey. They are a team of experts who will understand your situation and help you find a solution.

Benefits of consolidation loans from Alpine Credits vs other lenders

Consider collaborating with Alpine Credits to get your consolidation loan. They offer several advantages that the banks usually don’t 

  Applying with Alpine Credits  Applying with other lenders 
Qualification criteria  Alpine Credits puts little emphasis on your age, credit score, or income status, which makes qualifying for a loan more straightforward.  They usually require applicants to have a good credit score and proof of income, which makes it difficult for those with low credit scores to qualify. 
Application process  The online application form for Alpine Credits is simple and can be completed in just a few minutes, streamlining the process for potential borrowers.  Applications with traditional lenders can be more complicated & complex, requiring you to fulfill several conditions and provide many forms of documents. 
Approval time  Alpine Credits promises approval in less than 24 hours, significantly faster than traditional banks and lenders. This quick turnaround time can be particularly beneficial if you require funds quickly.  It may take a longer time for you to get approved with traditional lenders. In some cases, getting approved can take between a few days to several weeks. 
Funding time  Your funds can be deposited into your bank account in less than a week.   Receiving funds from a traditional lender can take months or longer. 
Reliability  Alpine Credits has a team of Financial Solutions Specialists to help you and answer any of your questions.  Many places can be deceptive in their offer, so confirm who they are. 

Seven reasons why borrowers consolidate debt

Canadians consolidate their outstanding bills and charges for several reasons. You don’t have to meet all seven reasons to qualify for a consolidation loan. Instead, they offer many benefits. 

Advantages of consolidation loans 

Consolidating your outstanding balances offers a few benefits to your overall financial health.  

  • Simplify your finances—instead of paying different sources or credit charges, you can use a consolidation loan to repay them. Focusing on just one loan instead of multiple makes it easier to keep track of your budget. 
  • Reduce interest payments—consolidation loan usually have comparatively lower interest rates than credit cards and short-term personal loans. 
  • Decrease monthly payment amount—as a result of lower interest rates, the amount that you pay per month also decreases. If you keep the same payment as you did, more goes towards the principal. 
  • Finish repaying debt faster—when you pay more towards the principal than interest, you’ll pay off your outstanding balances more quickly.  
  • Improve credit score—in Alpine Credits’ case, they do not report to credit bureaus. If you use a home equity loan to repay your charges, the bureau will only see that your debts are satisfied and adjust your score accordingly. 

Terms related to consolidation loans 

  • Debt consolidation – taking out a loan to payoff existing debts. It is an alternative term to loan consolidation that other institutions might use. 
  • Credit utilization ratio – credit card debt is measured by dividing how much credit you’ve used by your available credit limit. Lenders may ask to see this percentage to determine your creditworthiness.   
  • Debt management – some companies will provide their services to help people develop a budgeting plan with a person’s existing income and financial circumstance instead of providing a loan. 
  • Debt settlement – the same companies that offer debt management services may also provide debt settlement services. With a settlement, the company will try to negotiate a new deal with creditors.  
  • Balance transfer credit card – some credit cards will have lower interest rates than your current one, which lets you repay your balance more quickly.  
  • Consumer proposal – another form of credit counselling is by signing an agreement with a creditor, stating that you’ll repay a portion of what is owed.  

Consolidation loan for bad credit

Those with bad credit may find obtaining a loan for consolidation from the bank is challenging. Still, Alpine Credits offers a unique opportunity to homeowners who don’t have the best credit standing.

Conclusion: the importance of consolidation loans 

Consolidating your loan balances into a simple and single payment per month is one of the best financial strategies. While you can use debt to build your creditworthiness and prove your reputation, having too much can also affect your ability to borrow loans, like car financing or mortgages.  

If you have a credit card balance you want to satisfy, consider accessing your home equity as a loan to be your main borrowing solution. If you have enough equity, you can get a home equity loan that’s easier to attain than other types of loans.  

While a consolidation loan is a good strategy, it is ultimately a tool to help borrowers get their finances back on track. You may see better credit scores, improved cash flow, and reduced stress, but remember to use the money for its intended purpose. During the time you spend repaying the principal loan, build new habits you can implement in the future.  

Key takeaways 

  • Consolidation loan allows you to simplify your finances by combining all your outstanding balances. 
  • Home equity can act as consolidation loan because they have a higher value and lower interest rates than an unsecured personal loan or a payday loan. 
  • Qualifying for a home equity loan with Alpine Credits is more straightforward than qualifying at a bank or credit union.  
  • Consolidation loan, when appropriately managed, can help you save money in the long run and help you build healthier financial habits.  

Find loan options in your area

Click on the links below to get started, and see the mortgage options available to you, in the provinces we serve across Canada!

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Frequently asked questions

A good portion of Canadians have multiple credit cards and outstanding loan bills. Borrowing a loan to repay those balances makes their finances more straightforward because they only repay towards one source, the lender.

If you consolidate your outstanding balances with a home equity loan from Alpine Credits, your credit score can only improve from there. Alpine Credits does not report to credit bureaus, so all they’ll see is your satisfied loans while you focus on repaying your home equity loan.

From a traditional financial institution, consolidation loans can be challenging to get if your financial standing doesn’t meet their standards. Alternative lenders like Alpine Credits make getting a loan easier by letting you access your home equity. 

Most lenders prefer that you have a strong credit score and steady income to qualify for a consolidation loan. On the other hand, home equity loans for your outstanding balances only need you to have enough equity in your property.

It depends on the lender. Regardless, most lenders will need you to prove that you meet more than the minimum requirements.