Loans to pay off a consumer proposal in Canada

If you want to start rebuilding your credit after taking out a consumer proposal, it might be time to compare loans to pay off a consumer proposal in Canada. This type of loan can help you pay off your debt so you can get back to better credit in less than three years. The main downfall is that you’ll have to pay interest on a consumer proposal loan, while payments on just the consumer proposal is interest-free.

What is a consumer proposal?

A consumer proposal is an agreement that you enter into with your creditors to begin to repay all of your debts. To negotiate your agreement, you work with a Licensed Insolvency Trustee (LIT) to figure out how much you’ll have to pay back. Usually you’ll get a portion of your debt forgiven by your creditors when you sign up for this type of agreement, and all forms of debt collection against you will typically cease.

Once your consumer proposal is accepted, your debt will be consolidated into one easy-to-manage monthly installment. You’ll typically get around 5 years to pay off your proposal and your credit score will go down to one of the lowest ratings possible (R9). Once you pay off your proposal, your credit score will go up to at least an R7 and you’ll need to work hard to rebuild your credit over time.

Should I pay off my consumer proposal early with a loan?

A consumer proposal loan is a specialized loan that can help you pay off your consumer proposal early. These loans typically come with interest rates that sit above 20%, making them much more expensive than consumer proposals themselves, which are interest-free.

One of the main benefits of taking out this type of loan is that your credit score will go up as soon as your consumer proposal is paid off. Another perk is that your lender will typically report all of your on-time payments to the credit bureau so that your credit score will continue to rise as you pay down your loan.

The downfall of getting a loan to pay off a consumer proposal is that you’ll typically pay much higher fees and interest on any money you borrow. It’s also possible that you could end up in more debt if you can’t afford your loan repayments once your interest starts to accumulate.

Compare loans to pay off consumer proposals in Canada

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Name	Product	Interest Rate	Loan Amount	Loan Term	Requirements
Marble Fast-Track Loan Marble Fast-Track Loan		18.99% – 24.99%	$5,000 - $15,000	36 - 84 months	Requirements: net cash flow of $150+/month after loan payment, min. credit score 300	Go to site View details	Compare	loading Fetching your data...

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What are the benefits of using a loan to pay off a consumer proposal?

There are a number of benefits to taking out a consumer proposal loan. These can include the following:

• Online application. Depending on your lender, you should be able to apply for a consumer proposal loan online in a matter of minutes.
• Set repayments. You’ll be able to negotiate affordable monthly repayments that suit your unique set of needs, lifestyle and budget.
• Better credit score. Your credit score will improve from either a R9 or R7 rating as soon as you pay off your consumer proposal, which will make it easier to apply for loans.
• Less time to rebuild credit. You can enter your 3-year “bad credit” period faster, which will let you start rebuilding your credit as soon as possible.
• Reporting to the credit bureau. Many lenders will report your repayments to the credit bureau so that you can rebuild your credit score in less time.
• Early repayment options. You may be able to pay your loan off early for no additional fees if you have surplus income or receive a lump sum payment.
• Dedicated support. You’ll usually get a high calibre of customer service from a dedicated lending agency.
• Bad credit doesn’t matter. You may be able to get approval for a loan to pay off your consumer proposal even if you have bad credit.

What should I watch out for?

There are a number of potential drawbacks to taking out a loan to pay off your consumer proposal:

• High interest rates. You’ll end up paying a lot more in interest on a loan, since the main draw of a consumer proposal is that it’s interest-free.
• Minimum loan terms. You may get locked into a minimum term on a loan, while a consumer proposal can be paid off at any time with no penalty.
• Capped amounts. You might only be able to pay off a portion of your consumer proposal with a loan, since they’re usually capped at a certain amount.
• Additional fees. You may have to pay hundreds of dollars in extra fees to negotiate exiting your consumer proposal and signing up for a loan.

What should I know before I apply for a loan to pay off a consumer proposal?

Eligibility requirements

To apply for a consumer proposal loan, you usually need to meet the following criteria:

Required documents and information

How else can I pay off my consumer proposal early?

If you don’t think a loan is the right fit for you, there are other ways you might be able to repay your consumer proposal ahead of schedule:

• Pay more each month. You can pay down your consumer proposal faster if you raise your monthly payment amounts or make more frequent payments.
• Pay a lump sum onto your balance. You’ll make better progress on your debt if you put any additional income you receive directly onto your balance.
• Refinance your mortgage. You may be able to repay your consumer proposal by adding the amount you owe to your mortgage when you refinance.
• Borrow from family or friends. If the amount you owe is small enough, you may be able to borrow extra funds from family or friends.
• Make payments more often. You’d be surprised at the difference paying weekly or biweekly can make instead of paying monthly. If you pay $360 a month, that’s a total of $4,320 a year. But if you pay $180 biweekly or $90 weekly, the total rises to $4,680 each year.

Bottom line

You can access loans to pay off a consumer proposal in Canada, helping you pay off your outstanding debt so that you can get back on track with your credit. These loans are suitable if you want to improve your credit score and don’t mind paying interest on the amount you borrow. Find out more about how you can qualify for this type of loan and apply today.

Frequently asked questions about loans to pay off a consumer proposal in Canada

• How much does a consumer proposal loan cost?

  You’ll usually pay over 20% interest on your consumer proposal loan, in addition to any extra fees you’re charged to negotiate your exit from your consumer proposal.

• How much will it cost me to pay off my consumer proposal early?

  Luckily for you, it won’t cost you anything. There are no fees or penalties charged when you pay your consumer proposal off early.

• Is a consumer proposal loan right for me?

  It depends on your financial situation. If you want to get your credit score back up faster it might make sense for you to pay interest on a consumer proposal loan so that you can clear your other debt.

  If you’re not sure you can afford the extra interest or you think you might struggle to make your repayments, and a consumer proposal might not be worth it and you should probably stick with your consumer proposal until your finances improve.

• How long does a consumer proposal typically last?

  Consumer proposals are usually set for you to pay them off in 3-5 years. Paying them off early has the benefit of helping you to restore your credit faster.

• How does a secured savings loan or credit repair loan work?

  These loans report your on-time payments to the credit bureau and let you build up your savings with secured financing. For more on this strategy for improving your credit, read our guide on secured savings loans here.

• What's the difference between insolvency and bankruptcy?

  The biggest difference? Insolvency is not a legal status, while bankruptcy is. Insolvency can lead to bankruptcy and is a state of being unable to pay your debts on time. On the other hand, bankruptcy releases you from your debts, but it also has long-term consequences.

• What happens if I miss payments on my consumer proposal?

  If you don’t make payments on your consumer proposal, it may be cancelled. If that happens, you’ll lose all the money you put down on it already and your creditors can resume collecting fees and interest on your debts.

• Can I get a payday loan while in a consumer proposal?

  No, you should avoid payday loans while in a consumer proposal. With their high APRs and short repayment terms, payday loans are a very expensive way to borrow and make it easy to get trapped in a cycle of debt.