How to Refinance High-Interest Debt in Canada

Managing multiple high-interest debts can be a daunting task, particularly when the credit card interest rates are around 20 per cent and everyday expenses in cities like Toronto or Calgary are constantly increasing. Some Canadians find themselves stuck paying hundreds of dollars in interest every month, yet their balances are not improving. The good news is that you can refinance high-interest debt to get back on track. You can make payments easier, reduce interest, and begin to create true financial stability by replacing costly debt with a lower-rate option.

What Is High-Interest Debt and Why Refinance It?

High-interest debt is generally unsecured borrowing, like credit cards, personal loans, or payday loans. The average credit card interest rates are approximately 19.99% APR in 2025, and the payday loans may reach up to 30%. These rates compound on a daily basis, and this implies that balances increase rapidly when you make minimum payments. Refinancing involves combining several debts with high interest rates into a single loan or credit product that has a lower rate. A debt consolidation loan at 8-12 percent can cut your interest payments by half or more. The policy rate of the Bank of Canada is 2.25 percent, and the prime rates are close to 4.45%, which suggests that borrowing is cheaper than it has been in recent years—making now a smart time to act.

Take Sarah from Vancouver, for instance. Her credit card balances at 22% were costing her $300 monthly in interest alone. She saved $1,500 a year after refinancing to a 9% consolidation loan, which she now spends on the activities of her children. Cases like Sarah’s demonstrate how refinancing can change not only finances but also contribute to peace of mind. If high inflation is still making debt feel heavier, check out our related guide: Strategies for Paying Off Debt During Inflation.

Advantages of Refinancing Your Debt in Canada

Refinancing is not a quick fix, but it has a number of significant benefits:

• Reduced Interest Payments: By moving from a 20% credit card to a 9% loan on a $10,000 loan will save approximately 1,100 annually in interest.
• Easy Payments: A combination of multiple debts into a single one simplifies the budgeting process and minimizes the risk of default.
• Better Credit Score: On-time payments, with fewer open accounts, can increase and improve your credit score in the long run.
• Quick Repayment of Debt: With lower rates, you repay more of the principal, and you will be out of debt faster.

However, there are possible drawbacks. The extension of a loan term may reduce your monthly payments, but in the long run, the interest costs will be higher. With a low credit score, you may not qualify for significantly better rates. Always compare deals and look into the fine print. Quebec residents need to note that the Consumer Protection Office imposes additional safeguards on loan terms and fees.

Top Options for Debt Consolidation in Canada (2025)

With interest rates stabilizing, 2025 presents a number of effective refinancing opportunities to Canadians:

• Balance Transfer Credit Cards: Transfer existing credit card debt to a new card with a 0% promotional interest charge over 6-12 months (typically with a 1-5% transfer fee). Most suitable for short-term repayment objectives.
• Debt Consolidation Loans: These loans are provided by banks and online lenders such as RBC, TD, or Spring Financial, and the interest rates range from 8.99 to 13 per cent based on your credit. Great for structured repayment over one to five years.
• Home Equity Line of Credit (HELOC): Homeowners can borrow against their property at rates that are close to prime + 0.5% (approximately 4.95%). This alternative has extremely low rates but is risky, as your house is used as security.
• Credit Counselling Programs: Non-profit agencies are able to negotiate reduced interest rates (as low as 0%), without taking out new loans. These are free or low-cost programs that are available throughout the country.

You may compare rates and offers on reputable websites such as Ratehub.ca or Loans Canada. Multiple loan inquiries within a 14-day window typically count as one credit check, minimizing any score impact.

How to Refinance Debt in Canada

• Evaluate Your Situation: List all debts, interest rates and minimum payments. Get a free credit report from Equifax or TransUnion- a score of 660 and above will most likely be eligible for better rates.
• Compare Options: Compare various refinancing options and aim for loans with lower interest rates of less than 12%.
• Apply Carefully: Prequalify first to avoid unnecessary credit hits. Prepare pay stubs, ID, and recent statements to expedite the approval process.
• Pay Off and Close Old Accounts: As soon as it is approved, use the money to pay off all outstanding debts and confirm closure in writing.
• Keep Track: Automate the payment and review the progress after every few months. You can use tools such as the FCAC Budget Planner to adjust your budget.

When to Seek Professional Help

Refinancing may not be sufficient to cover a debt of over $20,000 or a debt that consumes over 40 per cent of your monthly earnings. In such situations, contact a non-profit credit counsellor or a Licensed Insolvency Trustee (LIT) to receive personalized advice. They can look into more in-depth relief alternatives like consumer proposals that can reduce or even cancel a portion of your debt.

Conclusion

One of the best methods of regaining financial control in the lower-rate environment in 2025 in Canada is through refinancing high-interest debt. Whether through a balance transfer, a consolidation loan, or professional counselling. The aim is the same: cut your interest, make payments easier, and create a space to save towards what is important. It is not about quick fixes, but about creating financial freedom that lasts. Take the first step today by visiting Global Investor’s website to explore in-depth resources and tools on debt consolidation and refinancing options.