What are the Pros & Cons of a Consumer Proposal?
Consumer Proposal Pros & Cons: What are They?
In order to find the most responsible financial decision to plan for your future, the best thing to do is consider a consumer proposal from all aspects.
The pros and cons will vary based on your individual situation; though, for many, it provides a reasonable alternative for bankruptcy.
Consider the Benefits
There are several virtues of consumer proposals – you simply need to decide which of them apply to your scenario.
- Lessens the amount you need to repay to your creditors;
- Offers you five years to repay the amount in predetermined installments;
- Payments are locked in for the full term meaning you can earn more money without it being applied to the amount you pay;
- It won’t impact your credit score as significantly as bankruptcy since a consumer proposal lasts only three years once it is finished;
- Forces a stop on any creditors garnishing your wages;
- Consumer proposals, when accepted by most of your creditors, lets you retain your assets (like a car or house) – so long as you pay the proposal in full and without defaulting;
- Ceases the stress and hassle of collection agencies calling you at work or home;
- Stops the accrual of interest on your loan amounts.
Consider the Negatives
Though consumer proposals help many every year, it is essential to consider the potential downsides of this financial choice.
- Defaulting more than three times without amending the terms of your proposal causes a total annulment of the arrangement itself;
- It still impacts your credit score, even though the period is shorter than with a bankruptcy;
- It does not address matters relating to secured debts, meaning if you have a vulnerable asset as collateral, it will not help you with the issue.
If you are unsure as to whether a consumer proposal is right for you, speak to a licensed credit counsellor to get reliable, objective advice.