Even though a consumer proposal can reduce the amount that you pay out each month in debt by as much as 80%, you might unexpectedly find yourself in the position of needing to apply for a loan.
However, if you have chosen to go down the consumer proposal route, this will make it difficult – but not impossible – to borrow from lenders. This is because, during a consumer proposal, your credit rating will lower to an R7 status, the third lowest rating above asset repossession (R8) and bankruptcy (R9).
Yes, you can, but you may find that your options are extremely limited and the amount of added-on interest will be extremely high. This is because you are seen as a financial risk to potential lenders. In their eyes, if they are going to take a chance on lending you money, they are going to want to be compensated appropriately.
Here are some things you should expect if you apply for a loan while in a consumer proposal:
– Your finances and credit will be assessed.
– You will need to provide evidence of a stable income.
– Your lender will need to be in touch with your LIT or consumer proposal administrator to discuss how responsible you have been with payments to that point.
– You’ll need to work with your trustee to make sure that you don’t take out a loan that isn’t feasible for your budget.
– You will need to show your administrator or trustee and a lender that you are able to manage both loan and consumer proposal payments.
If you can provide evidence that your consumer proposal has made you more responsible with money, then you may be able to get approved for a loan. However, there are a number of pitfalls that you should be aware of that your insolvency trustee can help you to navigate:
Getting a good lender – Your trustee can help you to find the best possible loan for you under the circumstances. They will have a vast knowledge of the current state of the market, lenders that can be trusted, and even have access to loan products that the general public would not normally be aware of.
Be aware of scams – There are also a lot of scams out there that target vulnerable borrowers and lead them into a false sense of security in order to steal their financial information. Your trustee can ensure that you don’t let desperation influence your thinking and inadvertently make your situation far worse.
Fluctuating interest – You should be cautious about lenders who will approve you easily because a low credit rating can give lenders permission to bump up interest on your loan, making it more expensive as time goes on.
Our licensed insolvency trustees are here to advise you on the best path to a debt-free life that suits you and your needs. If you’re struggling with financial problems, we can help. Contact us today to speak to a member of our team.