How a Consumer Proposal can Help you Break the Debt Cycle
If each month you’re saying to yourself, this is the month I’ll be able to pay more of my credit card principal down, only to find that you’re going to a payday lender for an expensive cash advance, it’s time to take control of your debt and get out of the debt cycle.
This may take the form of a consumer proposal.
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First, what causes a debt cycle?
While most people fully intend on paying back debt, finances have a way of getting away from you if you are living beyond your means.
As debts reach higher, your ability to pay down principal changes to being only able to make minimum payments.
When you begin struggling to pay rent, make payments on your car loan, or can’t make credit card payments at all, debt only gets worse as your wages are garnished, interest on your credit card compounds, and you seek alternative ways to pay back the money owed to your creditors.
When you’ve reached the last resort of payday loans, it’s time to get ahold of an insolvency trustee or credit counselor.
The vicious debt cycle may feel like a prison, but you do have options to get out of it and get ahead of your debt.
How can a consumer proposal help with the debt cycle?
If you’ve never heard of a consumer proposal, you may think your only option is to declare bankruptcy.
However, a consumer proposal is ideal for the individual who is under substantial stress from unsecured debt.
Unsecured debt is typically that which is not backed up by specific assets, such as credit card debt; secured debt is more traditional loans like mortgages and vehicle loans.
The objective of a consumer proposal is to do one or both of two things: reduce the sum of your debts to a fraction of what is owed, or allow you to pay off the debt over a longer period of time.
With a consumer proposal, your trustee works directly with your creditors to come to an agreement on how much you can pay back.
This may be done in the form of one lump sum, or over a period of up to five years.
In the event that you are making monthly payments, you will only make one direct payment to your trustee, who then allocates the funds to your creditors.
In some instances, you may be able to reduce your debt to as little as 30% of your original balance.
Once you and your creditors have agreed to the terms of a consumer proposal, you will also meet with a credit counselor to help you understand how to live within you means and get you back on your feet financially.
A consumer proposal helps you pay down your debt entirely.
With the smaller payments, you’re also able to save money and begin living a more budgeted lifestyle while rebuilding your credit.
There is help to be found
Being in cyclical debt can be overwhelming and stressful.
Whether you go the route of a consumer proposal or another debt consolidation option, we’re here to help you navigate your financial choices and get you set up with a better budget.
It’s time to break the debt cycle.
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