Should I Consolidate My Debt?

If you have multiple loans or debts (such as student loans, personal loans or lines of credit, or credit card debt), you may be able to have these loans or debts consolidated (combined) into one loan with your lending institution. 

Before consolidating your loans or debts, you should be aware of some of the advantages and disadvantages of this option.

Advantages of Debt Consolidation

• you would make only one loan payment per month, instead of multiple payments per month
• it may be easier for you to keep track of one payment, rather than multiple payments
• your loan may be held at the lending institution of your choice
• if you have a poor credit rating because you have missed payments in the past, your credit rating may improve if you are now able to manage one monthly loan payment and you can make it on time
• you may benefit from a lower interest rate, offered at your lending institution, which would reduce the amount of interest you pay over the life of your loan
• you may be able to negotiate to have any of your defaulted student loans included in the debt consolidation
• you may be able to negotiate an extended repayment period which would decrease your overall monthly payment amount

Disadvantages of Debt Consolidation

(these disadvantages apply only to government-sponsored student loans)

• you will lose your eligibility for Alberta Interest Relief and the federal Repayment Assistance Plan
• you will lose your eligibility for interest-free status if you decide to return to full-time studies
• you will lose your eligibility to claim the 17% tax credit on the interest portion of the amount paid on your student loan each year