I have $28,000 in credit card debt and a have a line of credit for my business which is reaching its max of $15,000.00.

I try to make my minimum monthly payments of my credit cards but not getting anywhere! I feel depressed. I am self employed and my wife does not know the mess I am in, if she did it would end our marriage.

I was wondering if any financial institution in Canada would give me a loan to pay off my debts. I don’t have any collateral, the only thing is I can promise to pay! I am looking for a loan of $48,000.00 I would like to pay off my credit cards and close two of them and keep one. I would like to pay down my line of credit and keep it just as a back up. If I were to get a loan at %10 I would be able to pay $1200.00 a month and pay it off in 44 months. At present I am making payments of $1000 on credit cards alone, but am not getting anywhere. PLEASE HELP ME. I KNOW I CAN PAY $1200 a month without any problem….will any one lend me the money?

Thank you for the help, sorry for the long e-mail.

Answer: Whether or not you will qualify for a debt consolidation loan will depend on your credit rating, your income, and any collateral you can provide.  There are ways to increase your chances of getting a debt consolidation loan, so before you apply be sure you have proof of your income, past tax returns, and details on all of your assets and debts.  By being prepared, you can increase your chances of qualifying for a loan.  Once you have all of your information assembled, start by making an appointment at your existing bank.  Since you already bank there, they are already familiar with your situation, so they are more likely to approve your loan request.

What do you do if you are rejected for a debt consolidation loan? You could try another bank, but don’t apply at too many banks, since that will lower your credit score.  You could go to a finance company, but their interest rates are very high, so that’s not recommended.

You could also make a budget and cut your expenses, so in effect you are giving yourself a loan.  Use your savings from cutting expenses to pay off the loan faster.

Another option is to file a consumer proposal.  A consumer proposal is like a loan; you make a fixed payment every month.  In some cases it’s better than a loan, because you can often settle your debts for less than the full amount owing, and get out of debt faster.

For more information, see our article that explains all of your debt management options.

Answer: If your goal is to protect your credit score, a debt consolidation loan is your best option.  If you qualify and can use the loan to repay all of your debts, you will have a very high credit score.

Unfortunately, as you stated in your question, it is very hard to get a debt consolidation loan.  We are in a recession, so unless you have assets, a good job, and perhaps even a co-signer, it’s not easy to qualify for a loan.

For that reason a consumer proposal may be a better option.  In fact, if you don’t qualify for a loan, it may be your most logical option.

We suggest you start by using our free debt options calculator to determine the cost of each of your options.  Then, consult a consumer proposal administrator to review your options and determine which option is best for you.

Answer: You can apply for a debt consolidation loan at a bank or finance company.   In simple terms, you “consolidate” by borrowing enough to repay all of your other debts, so you are left with only one monthly payment, hopefully at a lower interest rate.  A home equity debt consolidation loan is where you borrow money using your house as security, which generally results in a lower interest rate.

Unfortunately during this recession it has become difficult to qualify, so you may have to consider other options.  More information on all options is available on our debt options calculator.

Answer: With the credit crisis it has become increasingly difficult to qualify for a debt consolidation loan.  If everyone is saying no, you have the following choices:

First, you could simply not get a consolidation loan.  Cut your expenses and pay down your debt on your own.  In today’s world that is often the best solution.

Second, you could pay your debts on your own, and then try again in six months.  It may be that six months from now your debts are a bit lower, and your credit score may be a bit higher because you have lived at the same place, and been at the same job, for six more months, so you may qualify.

Third, instead of a debt consolidation loan you could try a debt management plan, which is like a debt consolidation loan, but there is no interest.  A not for profit credit counsellor can negotiate a repayment plan where you pay the debts in full, but at a reduced interest rate.

If you can’t afford to repay your debts in full, the next option is a consumer proposal, where a licensed proposal administrator works out a plan where you repay a portion of your debts.

If all else fails, the final option is personal bankruptcy.

The point here is that just because the bank says no, you don’t have to give up.  There are other options.  To find out more, check out our free Debt Options Calculator to see the cost of the different options.

We have an excellent credit and have never defaulted on anything. We both have good jobs.

Thank you

Answer: Yes, it is possible to get a debt consolidation loan for $85,000.  However, for that amount the bank would probably require a very high income, or collateral, or more than one co-signer.  For that level of debt a home equity debt consolidation loan may be necessary, where the bank places a second mortgage on your home to secure the debt.  To find out if you qualify, talk to your bank.

Answer:  When you apply for a debt consolidation loan a note appears on your credit report that a credit check was performed.  If you get the loan, your credit is not harmed.  However, if you apply for a number of loans and are rejected, your credit report will be harmed.  We therefore recommend that you discuss this with your lender, and only apply if you have a good chance of getting the loan.

Answer:  No.

If you have more debt than you can handle, bankruptcy may be an option, but it is the last option you should consider.  There are many bankruptcy alternatives, and you should consider all of them before deciding to file bankruptcy.

Start by making a personal budget to see if you can cut expenses and use the extra cash to repay your debts.   On this site we offer a free trial of budgeting software to make the job very easy.

Your next option is to consider a debt consolidation loan, where you borrow at a lower interest rate to repay your high interest rate debts (like credit cards and payday loans).

If you don’t qualify for a debt consolidation loan, a credit counsellor may be able to help you file a debt management plan where you get extended time, and lower interest, to repay your debts.

If that’s too expensive, a consumer proposal is a way for many Canadians to make a legal settlement on their debts for less than the full amount owing.  (In the United States, you can consider a Chapter 13 Wage Earner Plan).

Only after you have tried all of these options should you consider personal bankruptcy.

Answer: In most cases successfully qualifying for a debt consolidation loan will improve your credit rating, because getting the consolidation loan is proof that you have good credit.  The only exception would be if you have borrowed more than other lenders may think is acceptable, or if you got the consolidation loan from a very high interest rate lender.

Also, if you do get a consolidation loan to pay off your credit cards, you should cancel all but one or two of your credit cards, because if you increase your debt level by continuing to use your credit cards you will ultimately make your credit rating much worse.

I am makeing an effort to pay off my debt.what is the best thing to tell them / way to handle this?

Answer: When you are unable to negotiate a settlement with a creditor, you have a number of options.

First, you could try to get a debt consolidation loan to borrow the money to pay the creditor.  If you have good credit, this may be the quickest way to deal with the creditor.

Your final option is to “call their bluff.”  You could simply start sending them the $150 per month that you can afford.  In most cases a creditor will not take you to court if they are receiving money from you each month.  However, “calling their bluff” is a risky move; there is always the chance that they will take you to court and attempt to garnishee your wages, so you must consider your options carefully.

If you can’t borrow to pay them off, and if you have other debts, you could file a consumer proposal.  A consumer proposal only makes sense if you have other debts.  If you have a large amount of other debts, another option is to declare personal bankruptcy, although again that makes no sense if you only owe $1,500.

Answer: Yes, you can get a debt consolidation loan to consolidate all of your debts.  Whether or not you qualify for the loan will be up to the bank or other lender, since qualification is based in part on your income.

Also, you should consider whether or not consolidating all of your loans makes sense.  For example, if you have a low interest car loan at, say, 5% from the dealer when you bought the car, it may not make sense to consolidate that debt into a loan with the bank where you pay 9% interest.  In general it makes sense to consolidate high interest debts, like credit cards, so you can eliminate your credit card debt and reduce the interest you are paying, which helps you get out of debt faster.