Pitfalls to avoid after Bankruptcy or Consumer Proposal

Pitfalls to avoid after Bankruptcy or Consumer Proposal

Once you’ve successfully emerged from bankruptcy or consumer proposal, you’ll want to avoid ending up in those situations again. Successfully re-establishing your credit after a bankruptcy or consumer proposal is very important. Doing so will make lenders trust you again and this will help you if you apply for a mortgage or another large loan.

However, there are a few pitfalls you’ll need to avoid if you’re trying to prevent ending up in financial difficulty.


Here are a few of the biggest pitfalls that you’ll want to stay away from.

Minimum payments on credit cards

Say no to minimum payments on credit cards. It can seem tempting to only pay off the minimum balance each month, but that isn’t a smart financial decision. Paying the minimum balance can result in paying huge interest over time. Every month that you only pay the minimum balance, more interest is added to the remaining amount. If you only make the minimum payment, most of the money you spend each month will go to paying down interest, not the principle.

Keeping a balance on your credit card

Whenever possible, you should avoid keeping a balance on your credit card. A small balance may seem like no big deal to you, but it can come back to hurt you in the long run. How? This is because large companies have to report unpaid outstanding balances on credit cards to credit bureaus. This means that, regardless of the amount, having an outstanding balance can downgrade your credit rating. There is even a case where a woman was denied a mortgage on a home because of an outstanding balance of three cents on her credit card!

Payday loans that you cannot pay back in two weeks to a month

In general, you should say no to payday loans whenever possible. They often charge very high interest rates. However, if you do get a payday loan, remember that payday loans are meant to be short-term loans. If you think that you’ll be unable to repay your loan in two weeks to a month, stay away from the loan. Payday loan companies charge high amounts of interest every two weeks. Over time, you could find yourself paying hundreds of percent in interest on the loan.

If you need a loan and you know that you won’t be able to pay it back in full quickly, avoid payday loans and stick to lenders like Prudent who offer much lower interest rates.

Cash advances on credit cards

Cash advances on credit cards are another incredibly expensive way to borrow money. Not only do these advances charge high interest (typically around 20 percent for most credit cards) but cash advances begin accruing interest immediately. This means you’ll end up paying far more interest on a cash advance than with many other types of loans.

The above article is for information purpose only. It has no relations what so ever with the services offered by Prudent Financial Services Inc.


Prudent reports all your Prudent loan payments to credit bureaus. But Prudent cannot “fix” or “repair” your credit. The credit bureau reports on the totality of your credit activities. The bureau updates regularly on your payments on credit cards, utilities, taxes as well as to banks, finance companies, credit unions etc. Prudent does try to educate its credit-challenged customers on wiser management of their financial affairs using information from responsible financial sources. E.g. Bankruptcy Canada and BDO.

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