Consumer Proposal Loan – Reduce Your Debt & Monthly Payments By Up To 90%

Searching for ways to get out of debt? You’ve come to the right place. While dealing with debt can feel extremely stressful, we can help you find a solution.

A Consumer Proposal is a formal debt relief program that can help you consolidate your debts and significantly reduce the amount you have to repay. If approved, you can then use a Consumer Proposal loan to fund the Consumer Proposal itself. When combined, this strategy can significantly consolidate your debt payments.

The process does involve some risk and effort. Let’s explore everything you need to know about a Consumer Proposal, a Consumer Proposal Loan, and the benefits and risks of this debt relief option.

What is a Consumer Proposal?

A Consumer Proposal is a debt relief program administered by a Licensed Insolvency Trustee (LIT). You work with your LIT to create an offer to pay your creditors a percentage of what you owe, to extend the time you have to repay your debt, or both. The maximum term of a Consumer Proposal is five years.

Who’s eligible for a Consumer Proposal?

You must owe between $1,000 and $250,000 in debt, excluding your principal mortgage to qualify for a Consumer Proposal. Only individuals can apply, not corporations. Corporations can file a Division 1 Proposal.

If you have more than $250,000 in debt, you can look into a Division I Proposal. This debt relief method is available to businesses and individuals.

To see if you’re eligible for a Consumer Proposal or Division I Proposal, speak to an LIT. An LIT can assess your financial situation and discuss the different debt solutions.

How does a Consumer Proposal work?

If you and your LIT decide that a Consumer Proposal is right for you, the first step is to develop your proposal.

Your LIT will file your proposal with the Office of the Superintendent of Bankruptcy (OSB). As soon as this happens, you can stop making payments to your unsecured creditors. Any collection calls, wage garnishment, or creditor lawsuits filed against you will also stop.

What happens if my Consumer Proposal is accepted?

If your creditors accept your proposal, you are responsible for making either a lump sum or monthly payments. You also have to attend two financial counselling sessions.

Once you meet the conditions of your proposal, you are legally released from the debts included in the proposal.

What happens if my  Proposal is rejected?

If your creditors reject your proposal, you have a few options:

• Make changes to your proposal and resubmit
• Talk to your LIT about other debt-relief options
• Declare bankruptcy

What debts are included in a Consumer Proposal?

When you file a Consumer Proposal most of your unsecured debts are included. Some examples are:

• Credit cards
• Installment loans
• Lines of credit
• Overdraft
• Student loans
• Tax debt
• Payday loans

Secured debts including your mortgage, car loan, and home equity loans or lines of credit are not eligible.

Can I get a loan while in a Consumer Proposal?

When you submit a Consumer Proposal, your credit score will drop. A proposal will stay on your credit report for three years after you’ve paid your debts, or six years from the date you filed, whichever is sooner. During your proposal, you may find it difficult to obtain a loan or credit.

If you need a loan while in a Consumer Proposal, you can try to convince lenders that your financial management skills have improved. But, there’s no guarantee you’ll get approved for a loan. Even if you do, you’re likely to pay a high interest rate, as the creditor is taking on a bigger risk.

Can I get a consumer proposal loan?

Some companies advertise consumer proposal loans. These are not the same as a Consumer Proposal. A proposal is a legal government debt relief program. A consumer proposal loan is simply a loan.

Financial companies try to brand loans as “consumer proposal loans” that you can use to pay off your proposal sooner so you can start rebuilding your credit. This might sound enticing but make sure you know the facts.

In a Consumer Proposal, your payments are interest-free. If you take on a loan, you’ll have to pay interest. Since most traditional banks won’t extend you a loan, you may have to turn to an alternative lender that’s likely to charge high interest rates.

A higher interest rate means higher monthly payments. If you get into a situation where you can’t afford your payments, you can fall back into debt.

Pros and cons of a Consumer Proposal

When you meet with an LIT they’ll go over your debt relief options and explain the pros and cons of each.

Some of the pros and cons of a Consumer Proposal include:

Pros:

• Collection actions stop. As soon as you file for a Consumer Proposal, all legal actions including wage garnishment and creditor lawsuits will immediately stop.
• Debt consolidation. A proposal consolidates all your debts into one affordable monthly payment, simplifying the debt repayment process.
• Keep your assets. As long as you keep up with your payments, you can keep your assets, including your house and car.
• Interest payments freeze. Once you file, you no longer have to pay interest on your unsecured debts.
• Consistent payments. Your payments stay the same even if your financial situation gets better.
• Reduce your debt. A Consumer Proposal allows you to reduce the amount of debt you have to pay back.
• Avoid bankruptcy. If you qualify for a Consumer Proposal, you can avoid Bankruptcy. This allows you to keep more of your assets and has less of an effect on your credit score.

Cons:

• Drop in credit score. Your credit score will drop during your proposal but it’s not permanent. It will stay on your credit report for up to six years. The impact on your score is typically less severe than filing for bankruptcy.
• Doesn’t include secured debts. A Consumer Proposal doesn’t include secured debts such as mortgage or car loan debt.
• Rejection of proposal. Your creditors can reject your proposal. In this case, you can make some changes to your proposal and resubmit, or you might have to file for Bankruptcy.   

Considering a Consumer Proposal?

A proposal is an excellent debt relief option for many Canadians. If your financial situation feels out of control and you’re not sure what to do next, speak to an LIT.

An LIT at Chase & Associates can assess your finances and help you find the right debt solution.

If you’re already in a Consumer Proposal and you have questions about getting a consumer proposal loan, make sure you speak to your LIT. For a free debt evaluation, call toll-free at 1-866-371-8331 or fill out our online form and we’ll contact you.