Unsecured lines of credit and personal loans usually cost less than credit cards, but more than a mortgage. Whether to consolidate them depends on the rate gap and your plan.

Unsecured lines of credit

  • Often variable rates, higher than mortgage rates
  • Interest-only minimums are common, so balances can linger
  • After consolidating, the line stays open unless you close it, which is easy to reuse

Personal loans

  • Fixed payments and an end date, which is good discipline
  • Check for an early payout penalty
  • If the rate is reasonable and the end date is near, leaving it may be fine

A quick comparison

Round numbers, for illustration only: a $20,000 unsecured line at about 11% costs roughly $180 a month in interest alone. At a lower mortgage rate, the interest on the same $20,000 might be closer to half that. The saving is real, but smaller than for credit cards, so costs and penalties matter more here.

Secured lines of credit

If you already have a home equity line of credit, it’s secured by your home already, and its rate may be close to mortgage rates. Moving it into a fixed mortgage can still help if you need a payment that forces you to pay the balance down, but the interest saving may be modest.

Overdraft

A chequing overdraft can carry a high rate. Include it in your list, and consider removing the overdraft once it’s paid off.

How to decide

  1. Compare each debt’s rate with the new mortgage rate.
  2. Include any payout penalty.
  3. Consider how much it affects your debt ratios.
  4. Consolidate the ones where the savings are clear. See which debts.

Student lines of credit

Student lines of credit often have favourable rates and interest-only periods. Compare carefully before including one.

Lines of credit with a co-signer

If someone co-signed your line or loan, paying it off releases them too. Make sure the account is closed, not just paid to zero, so their liability ends.

After paying off a line of credit

Ask the lender to close it, or reduce the limit, unless you have a clear reason to keep it. See your paid-off cards.

This article is general information, not financial or legal advice. Lender requirements, rates and fees change and depend on your situation.