Can I get a loan while in a consumer proposal

• How does a consumer proposal affect my ability to get a loan?
• How is your credit score impacted by filing a consumer proposal?
• What are my options for getting a loan while in a consumer proposal?
• What to expect when you apply for a loan during your consumer proposal
• Are there other options instead of a consumer proposal?
• What happens during a consumer proposal?

How does a consumer proposal affect my ability to get a loan?

A consumer proposal is a binding agreement made with your creditors to pay back a portion of your unsecured debts. This is done through a Licensed Insolvency Trustee over a period of time, typically up to five years.

While it serves as a valuable debt relief option, it also signals to potential lenders that you’ve had difficulty managing your debts, which can influence their willingness to offer personal loans, lines of credit, or additional credit card debt facilities.

In a nutshell, it is perfectly legal to obtain a loan while in a proposal, but you may not be approved, also you need to consider the interest rates given your delicate financial situation.

How is your credit score impacted by filing a consumer proposal?

Filing for a consumer proposal places an R7 rating on your credit rating, indicating that you are making monthly payments through a special arrangement to settle your debts. This rating stays on your credit report for six years from the date the proposal is filed or three years from the day the proposal is complete, whichever comes first.

As payday lenders will carry out a credit check before approving you for a loan, this could impact your ability to secure new funding. If you are successful in getting a loan, it will likely come with higher interest rates.

How can I rebuild my credit score after a consumer proposal?

Rebuilding your credit score post-consumer proposal is important. This can include securing a short-term loan or a secured credit card. However, this is only a good idea if you’re confident you can make your payments on time, showing that you can manage debt responsibly.

Post-filing, we will always encourage you to start rebuilding your credit on day 1 – not wait the 6 years. If you need help, our professionals are here to offer honest, trustworthy advice.

Participating in financial counselling sessions, offered as part of the consumer proposal process, can also provide valuable insights into managing your finances effectively.

What are my options for getting a loan while in a consumer proposal?

When you’re working through a consumer proposal, you might think getting a loan is off the table. But there are a few options you could consider that could help you out. Here’s a straightforward look at what you can do:

1. Find Someone to Co-sign Your Loan

This means asking someone who trusts you and has a good credit score (like a family member or a close friend) to sign the loan with you. If you find it hard to keep up with payments later on, they’ve agreed to step in and help out. It’s a big ask, but it can really increase your chances of getting that loan.

2. Go for a Secured Loan

This type of loan involves something valuable you own, like your car or your house, serving as a safety net for the lender. If things don’t go as planned and you can’t make the payments, the lender has the right to take that item as payment instead. Because there’s less risk for them, they might be more willing to give you the loan.

3. Look for Lenders Who Help People with Bad Credit

Some lenders understand that everyone has rough patches and specialize in helping people who are working to get back on their feet financially. These lenders might be more open to considering your application, even with the consumer proposal.

4. Wait Until After Your Consumer Proposal is Done

Once you’ve wrapped up your consumer proposal, you can start rebuilding your credit step by step. As your credit score gets better, you’ll find it easier to get approved for loans, often with better terms. This option also means you won’t have to deal with additional payments while following your consumer proposal debt management plan.

What to expect when you apply for a loan during your consumer proposal

When applying for a loan during a consumer proposal, expect to face scrutiny regarding your credit rating and financial stability. Lenders may require:

• Full disclosure of your consumer proposal status.
• A co-signer with a good credit history.
• Higher interest rates to offset the perceived risk.
• Smaller loan amounts than typically offered.

Being prepared and understanding these expectations can help navigate the process more smoothly.

Are there other options instead of a consumer proposal?

If a consumer proposal doesn’t seem like the right fit for your financial situation, don’t worry. There are other debt relief solutions, such as:

• Debt management plans (DMPs): An agreement between you and your creditors to pay your debts through monthly debt repayments.
• Debt consolidation loans: Combining multiple debts into one loan with a lower interest rate.
• Debt Settlement: Negotiate to pay back less than you owe in a lump sum. It can affect your credit and not all creditors might agree.
• Bankruptcy: A last-resort option that clears most debts but has significant impacts on your credit and can result in loss of assets. It’s meant for situations where no other solution fits.

What happens during a consumer proposal?

If you decide that a consumer proposal is the right next step for you, you’ll likely want to know what to expect from the process. Check out our quick video below – it has all the information you need, but if you’re still left with questions, feel free to give our team a call.

 

 

Take back financial control with Harris & Partners

Finding your way through financial struggles can feel overwhelming and isolating. If you’re grappling with high levels of credit card debt, unsecured debts, or finding it challenging to keep up with monthly payments, know that you’re not alone.

Many Canadians find themselves in similar situations, searching for a way to manage their financial burdens without sinking further into debt. A consumer proposal is a path that offers relief, allowing you to repay a portion of your debt under the guidance of a Licensed Insolvency Trustee.

Whether you’re still figuring out your options or you’ve started the process and you need some professional, honest advice, you can count on us. We’ve helped hundreds of Canadians just like you find their way back to financial freedom. If you’re ready to be next, reach out to our Licenced Insolvency Trustees today.