Call For a Free Consultation
(416) 498-9200

Debt Consolidation Loans

What You Need to Know

You have seen all the ads – been told how a debt consolidation loan will get you out of financial trouble and reduce your monthly payments. And yet, at the back of your mind you have some nagging doubts. Something does not quite add up.

Depending on your situation – that ‘not adding up’ can mean thousands of wasted dollars and years of heavy unnecessary debt load.

Basically, debt consolidation is the combining of all your unsecured debt (credit cards, payday loans, etc) into one monthly payment. This can be done in three main ways – borrow money from a bank or a private lender; take on a Debt Management Program; or seek debt relief through a Consumer Proposal to your creditors.

Debt Consolidation Loans

Here is what the debt consolidation lenders don’t put in their ads:


If you have missed even one payment or gotten a collection call – it may be too late to quality for a bank loan.

To get a debt loan consolidation from a bank – you will have to have a spotless credit history, a steady income, and strong home equity or a co-signer.

If you use your home equity and are unable to make the payments – you could lose your home. Frequently, people who take out debt consolidation loans spend their credit cards up to the maximum again – and find themselves in even more debt and more trouble.

A co-signer is someone – usually a close friend or relative, who is promising the bank that they will pay the loan off if you do not. Do you really want to put a close friend or relative at risk like that?

Private Lenders

If your lender is a not a bank, but one of the growing number of private debt consolidation lenders – you will discover the high costs of private lending. With sign up and management fees – many people end up paying over 30% interest. If you own any assets free and clear – the private lender may ask you to use them as security. Missing a payment or two could result in your loosing what few assets you may have – and still owing the balance to the private lender.

Debt Management Program

A Debt Management Program is a free service offered by credit councillors. To qualify for a Debt Management Program, you need to have sufficient money left after you have paid for the basics of life – to be able to afford the program. The councillors will contact your creditors and try to negotiate an agreement for you.

They may be able to get your creditors to reduce the amount of interest you are being charged. It is very important to understand that this ‘agreement’ is NOT legally binding. Any one or more of your creditors may decide to not participate. If you wages are being garnisheed, or legal collection action is being taken against you – there is nothing in a Debt Management Program that will force your creditors to stop such actions. At any point in the process – your creditors can decide to go after you for the full amount they are owed.

Consumer Proposal

If you owe less than $250,000 in unsecured debt (not including you mortgage) and cannot reasonably pay your unsecured debts in a timely manner – you may qualify for a Consumer Proposal. If you owe more than $250,000, you may qualify for a Division 1 Proposal.

A Consumer Proposal, if accepted by the majority holders of your unsecured debt, will

  • force all your unsecured creditors to accept the Proposal
  • reduce the amount of out outstanding debt you owe to an amount you can afford,
  • pay off all your unsecured debt covered in the Proposal in 5 or less years,
  • allow you to keep your home (as long as you keep making the mortgage payments),
  • stop all legal collection actions by your unsecured creditors (including garnishees, court actions, collection calls, etc), and
  • give you the chance to get on with your life.

So, why should your creditors accept the Proposal? Self-interest, accepting a Consumer Proposal means that your unsecured creditors will get more money than if you go into bankruptcy.

Your Trustee will deal with your creditors on your behalf.

A Consumer Proposal is a binding legal agreement made between a person and their unsecured creditors. By law, only a Licensed Bankruptcy Trustee (such as David Sklar & Associates) may submit and oversee a Consumer Proposal. The costs of the Trustee are included in the one monthly payment that you will be making to the Trustee for disbursement to your unsecured creditors. For additional information, visit our main Consumer Proposal page or call us for a Free Consultation at 416-498-9200.

Is a Consumer Proposal Right for You?

Find out if a Consumer Proposal is right for you! Speak with the experts at David Sklar & Associates (Licensed Insolvency Trustees). With six offices in the Greater Toronto Area, David Sklar & Associates is one of Toronto’s most trusted filers of Consumer Proposals – put our experience to work for you. Call 416-498-9200 or Contact Us to book your Free Consultation and Get Help Now!

We Can Help

If your debt problems seem insurmountable – we can help. At David Sklar & Associates, our Licensed Debt ProfessionalsTM have the experience and knowledge to help you get out of debt. During your consultation, we will help you understand what your current financial situation is, how best to fix it, and how to move on to a better life. With six offices in the Greater Toronto Area – we are here to help.

Call Us Today For a Confidential & Free Initial Consultation Call 416-498-9200