One debt repayment program that may be of interest to you is a consumer proposal.
It’s a stable option because the payments are locked in for the length of the proposal.
Once creditors agree to your plan, they can’t change the terms on you.
However, it’s good to remember that as the debtor, you can always pay off a consumer proposal early.
The primary reason you may choose to pay it off early is to rebuild your credit score quicker.
As soon as you pay off your consumer proposal, the information will be removed from your credit report.
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You may also want to make payments ahead of time in case of an emergency, and so you don’t risk missing payments.
If you do miss three payments in a row, your proposal will be annulled, and all the debts you are trying to eliminate are brought back into the picture.
Find out more about options to pay off your consumer proposal early so that you can decide if it’s the right course of action for you.
Make Biweekly Payments
You can reduce the amount of time you’ll be paying off your consumer proposal by making biweekly payments.
You’ll be making one extra monthly payment per year this way, and you’ll be able to pay it off a bit early.
Make Slightly Higher Payments
You never know when you may have some extra cash lying around.
You might begin to earn more at your job or pick up a side gig that increases your income.
In this case, you may choose to make slightly higher payments and put more towards your proposal.
Even an extra 25 dollars per month can help you out.
You’ll be able to shorten the amount of time you’ll be paying off your proposal and take some pressure off your shoulders.
Another option to pay off your consumer proposal early is to make a lump-sum payment.
You can do this by using money from a tax refund or bonus from work and put it toward paying off your consumer proposal.
You’ll be putting your extra cash to good use so you can reduce the length of your proposal.
Selling Your Home
Generally speaking, a consumer proposal debt relief option is best for those with some equity in their home but not enough to be able to refinance and pay off unsecured debts such as credit cards.
You can make a deal with your creditors to make monthly payments equivalent to the equity as one way to keep your home.
However, you never know when your situation may change, and you want to know your other options.
It may be time to downsize, or maybe you need to relocate for your job.
Therefore, during your proposal period, you may opt to sell your home and pay off your consumer proposal ahead of time.
You’re in control of your assets when you file so selling your house will be allowed in your situation.
Cashing in Your RRSP to Pay Off A Consumer Proposal Early
While it’s an additional option for you, cashing in your RRSP to pay off a consumer proposal early is a bit more complicated one.
The reason being is that there are many financial consequences to consider, including:
- You will have to pay taxes on any withdrawals, which means you must take out more than the total remaining outstanding on your proposal to completely pay it off.
- If you have an employer contribution plan, cashing in your RRSP could mean your employer will stop making matching contributions until you replace the withdrawn amount.
- Assuming your RRSP has positive earnings, it makes sense to leave the investment as is, rather than pay off an interest-free consumer proposal.
- You may be jeopardizing your retirement by withdrawing funds today.
This particular option is generally not recommended by experts unless there is a pressing reason why you need to borrow in the immediate future and want to pay your consumer proposal off now.
Getting A Loan To Pay Out A Consumer Proposal
While you may find it hard to believe, there are companies out there that will offer you a loan to pay out your consumer proposal.
They encourage you to do so by reminding you that you can get a head start on improving your credit score this way.
However, there’s one problem that can be summarized in one word, and that’s interest.
You don’t have interest payments with a consumer proposal.
While with a loan, the opposite is correct and you will have to pay interest.
Even if your monthly payments stay the same, you’ll be paying off your consumer proposal much longer because you’re going to have to still pay interest too.
You must take the time to crunch and analyze the numbers before you decide to borrow to pay off a proposal.
The rule of thumb is to confirm that you’re not paying interest rates of 20 percent to 30 percent or more for the life of the loan.
You may feel an urge to go this route because you know there are reputable mortgage brokers who can help you build a credit recovery plan.
However, choosing an unsecured loan is typically not an ideal way to go.
The point of a consumer proposal is to get you off to a fresh start with your finances.
The last situation you want is to get yourself back into debt.
There’s no need to stress and stretch your finances if you don’t have to.
Your money problems can be solved with a consumer proposal if you have a good income and assets you would like to protect.
At Bankruptcy Canada, we’re here to help you navigate your finances and options when it comes to paying off your consumer proposal early.
Get in touch today so we can work together to guide you in finding financial freedom once again.
Local bankruptcy trustees and consumer proposal administrators are standing by and available to assist you with getting out of debt.
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