A consumer proposal is one of the best ways to settle severe levels of debt and improve your financial situation.
In many cases, it can settle up to 80% of your unsecured debt and the remaining 20% can be paid off interest-free over the course of up to five years.
However, a consumer proposal can leave a mark on your credit report that stays for three years following the completion of your consumer proposal or six years from the date you filed it.
This means that the consumer proposal will automatically be removed from your credit report after six years from the date you filed it, or you can speed up the process and pay off the remainder that you owe.
Once the consumer proposal has been settled, it takes just three years for it to disappear from your credit report.
The faster you pay off the remainder, the sooner the mark disappears from your credit report.
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How a consumer proposal affects your credit report
Your credit report will immediately be hit with a negative mark the moment you finalize the consumer proposal.
This will result in either an R7 or R9 credit rating on your report.
R7 means that you’re making regular payments through a special arrangement to settle your debts.
R9 means that you are in bad debt, placed for collection or have claimed bankruptcy.
As mentioned above, these marks will stay on your credit history for up to six years.
However, filing a consumer proposal doesn’t lock you out of financial aid.
You can still seek new credit before your consumer proposal has completed.
While it may be slightly more difficult for you to find lenders, having an R7 or R9 due to a consumer proposal doesn’t immediately lock you out of borrowing money in the future.
This means that it won’t affect secured loans such as your mortgage or car financing as long as you’re able to stay up to date with payments.
Recovering after a consumer proposal
For most people, a consumer proposal is the best option to settle their debts and reset their financial life.
Despite the three to six years that the mark remains on your credit history, it’s a relatively short amount of time and doesn’t affect your financial options as much as people assume.
As long as you continue to improve your credit, pay off the remainder from your consumer proposal and work on proper budgeting strategies, you’ll find that a consumer proposal is one of the best ways to restore your financial independence.
We understand that debt can be difficult to cope with.
If you’re in need of more assistance with consumer proposals or debt relief options, feel free to contact us today for more information and we’d be more than happy to help you.
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