Consumer Proposal or Debt Consolidation: Which is Right For Me?
Are you swimming in debt?
If so, you might be desperate to find the right path to relief.
In this article, you’ll find key points for two of the main options.
If you feel trapped in debt, then you could be looking for a way out.
A lot of people turn towards debt consolidation but this might not be the best choice.
The reality is that a consumer proposal could provide the key consolidation benefits that you are searching for.
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Why Might Debt Consolidation Be The Wrong Choice?
It’s important to first be aware that debt consolidation, although a form of debt relief, is a loan.
You take out another loan to cover the costs of the current debt.
The aim is to reduce the interest with the new loan which is important because the interest can be the real killer.
It also simplifies the situation because rather than paying money to multiple creditors, you will only be making one payment.
The problem is that the level of debt remains the same and it could actually grow over time.
Particularly, if you are unable to make the payments for the new consolidation loan that you take out.
So, you’ll need to repay all the debt that you owe with the accumulated interest.
If you already have a bad credit score, the interest could be high and the monthly payment might not even fit your budget.
It’s possible that you won’t even qualify for a debt consolidation loan.
What About A Consumer Proposal?
So, due to the issues with debt consolidation, you might want to think about a consumer proposal instead.
There are benefits here.
You still get the consolidation because while you will be paying all your creditors the actual payment will go to a trustee.
They will then ensure that each creditor gets their share.
The payment level is also far lower because you make an offer to reduce the debt which will usually be accepted.
As such, it combines the benefits of a debt settlement and consolidation.
Another key benefit is that the proposal is interest-free and it covers all your debt.
You won’t need to provide security either or put your assets at risk and the lower payment is far easier to manage.
Could Debt Settlement Be The Right Choice?
Debt settlement can reduce the amount you pay to your creditors, but it doesn’t provide all the benefits of the consumer proposal.
It is also not handled by industry professionals and is not regulated.
As such, people often view a consumer proposal as being the safer choice.
Other options certainly do exist but they won’t deliver the positive results that you need.
Most people are not in a suitable position to use a debt settlement company.
To benefit from negotiating with creditors by yourself or with the support of a debt settlement company, you need a strong position.
You should potentially have money available to pay off a significant portion of the debt immediately.
Or, you might be able to negotiate a way to pay off the debt that suits your financial needs.
Turning to a Debt Proposal
You probably don’t have this and that’s why many would-be better turning to a consumer proposal.
You could consider using the equity on a home to cover the costs of your debt but this could be risky.
If you have any problem making payments, then suddenly your home is at risk.
This could ultimately lead to a foreclosure.
If you do choose to take out a second mortgage, then you could also be left dealing with a high-interest rate for a large loan that makes it impossible to pay back.
Consumer proposals provide you the legal protection you want and they also protect you from any negative action that a creditor can take.
With a consumer proposal, creditors can and will take legal action against you.
They can seek out wage garnishments or even argue that your accounts should be frozen.
By filing a consumer proposal you can take action before things reach this point and ensure that you don’t make your debt far easier to manage.
If you are interested in learning more about the debt relief options available, do make sure that you contact us today.
We have helped over 100,000 Canadians gain the relief they need from debt and we’re confident that we can help you too.
Our main aim will be to ensure that we find a plan that suits your needs and delivers the results that you want.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal