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What is debt consolidation and when is it right for you?

May 17, 2024
5
min read

Thinking about taking out a consolidation loan to pay off high-interest debt? Here’s what you should know!

Man looks at credit card and phone

If you’re dealing with credit card debt and only making minimum payments, you might feel like you can never get ahead. Without a plan, multiple debts keep building, and it can soon feel like you’ve lost control.  

“If you’ve got debt, don’t wait!” advises Jenessa Bockrandt, Personal Banking Advisor at Cambrian. “It’s best to ask for help sooner than later.”

“Debt won’t go away on its own. By working with one of our advisors, we can find a solution to undo your debt faster!”

We met with Jenessa to discuss what a debt consolidation loan is, and whether it’s right for you:

How does debt consolidation work?

“With a Cambrian PayOff Loan, we take all the debt you’ve accumulated and put it into a loan with a lower interest rate,” says Jenessa.

“We’ll wrap different debt sources into one easy payment that works within your budget. You’ll save money on interest and pay off your debt faster.”

“Having a payment schedule helps you pay off your debt in a set period of time, rather than making never-ending series minimum payments - you don’t get anywhere that way!”

Try our PayOff Debt calculator to see how much you could save on interest with debt consolidation!

Does debt consolidation hurt your credit?

“A PayOff loan will affect your credit score - but in a positive way! It actually improves your credit by reducing your credit utilization.”

Credit utilization is the percentage of available credit that you use. For example, if you had a credit card with a $10,000 limit and you had a balance of $2,500, that means your credit utilization would be 25%.  

“Credit utilization is an important factor in determining your credit score. Try to use less than 30% of your available credit, and you’ll gradually improve your credit score.”

When should you consider debt consolidation?

“I’d recommend debt consolidation for anyone who’s accumulated consumer debt that they can’t pay off at the end of each month,” says Jenessa.

“If you have debt on a revolving line of credit (like a credit card), you can benefit from a consolidation loan.”

“However, if you expect to pay off your debt within a month or two, a consolidation loan may not be the right fit. But if it could take longer than 3-4 months to pay off, a consolidation loan can help you save money on interest.”

To help you make your decision, let’s weigh the pros and cons of debt consolidation!

Pros:
• A loan gives you a set payment schedule to repay your debts, which keeps you on track to paying it off!

• You have the option to add Payment Protection to your loan. That means if you become sick or injured, your loan payments will be covered. If you pass away, the insured balance of your loan will be paid off completely.

• Get a lower interest rate than you would with a credit card.

• Enjoy peace of mind knowing your debt has an end date!

• At Cambrian, all our personal loans are open, so if you pay it off sooner than expected, you won’t pay a penalty!
Cons:
• Your monthly loan payment may be higher than the minimum payments on your credit cards. However, that’s better in the long run, because it means you’re paying off the debt in full rather than just paying interest and not making progress!

What do you need to qualify for a consolidation loan?

Everyone’s financial situation is different, but in general, Cambrian members need the following to qualify for a consolidation loan:

  • Proof of income (from an employer, self-employment, or pension).
  • Credit history.
  • If necessary, a co-signer or security (such as a home or vehicle).

“It’s best to apply and book a meeting with one of our advisors, who can advise what’s needed for your type of debt,” suggests Jenessa.

Cambrian members can also apply for loans online using our website! Apply for a debt consolidation loan today.

How to consolidate my debt?

At Cambrian, we cater our debt solutions to each individual member, from the length of term to the loan amount. There’s no one-size-fits-all solution - it’s all personalized.

“We work with our members to provide advice and guidance, but we also listen. No two situations are the same, and at Cambrian, we can help our members achieve a solution that works for their unique situation,” says Jenessa.

“Once you pay off that debt, we can help you work towards other goals too. What else do you want to achieve? From starting your investment journey to saving for your first home, we’ll work together to achieve your financial goals!”

Start paying down your debt faster - contact us today!

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“I had a wonderful experience at Cambrian. I've been with the same institution for the last 21 years and all the fees and restrictions have finally pushed me into wanting to make some changes.

My advisor was prepared for my arrival with all the documents ready and waiting. He took the time to go over each one...”

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Stephan

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