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Smart Money Club: Does a Consumer Proposal in Ontario Give Me Bad Credit?

prudent1A consumer proposal has become a popular debt relief option used by many Canadians who find themselves loaded with debt with no real way pay it off, even over time. Predatory lenders who extend payday loans and high interest credit cards can cause an initially stable financial situation to quickly become unmanageable and the ease with which these credit types are granted has found many Canadians in financial pickles, unsure of where to turn.

We are often asked, does a consumer proposal in Ontario give me bad credit? This is a very understandable question. The answer is both simple and complex. A consumer proposal in Ontario will have .an impact on your credit report, but when comparing that impact you should make sure you are comparing apples to apples. By this we mean, how does your credit look at the current moment?

For example:

  • Are your credit cards maxed out?
  • Do you have a lot of debt?
  • Have you been falling behind and making late payments which are being reported to the credit report?
  • Are any of your credit products with collections?
  • Is there any defaulted credit reporting to the credit report?

If you’ve answered yes to any or all of these questions, then you may already have bad credit. Things like late payments, collections and defaulted credit items (R9s and I9s) report to the credit report for 7 years, and even too many credit cards or cards at their limits can drop a credit score very quickly.

So, will a consumer proposal in Ontario give you bad credit? The simple answer is yes, it will show on your credit report and will take time to rebuild. However, once started, you’ll likely be much better off. How?

  • In a consumer proposal your creditors accept a fixed amount of money to be repaid to them over a period of 4-5 years – this means a single monthly payment paid to a trustee monthly which is then dispersed to your creditors, the total of which can be paid at any time.
  • Usually a consumer proposal ends up being less than the amount of debt initially owed.
  • Interest and collection action by unsecured creditors immediately stops.
  • A proposal is only on your credit for 3 years from the date it is paid in full.
  • You can start rebuilding credit right away.

The downside to a consumer proposal is that once established, many lenders won’t extend credit to people until they’ve finished the proposal and have re-established credit. Most – not all. The trick is to find the right lender, one who knows that bad things happen to good people and there is always room for a second chance.

At Prudent Financial, we offer loans to people who are 2/3 through their proposal to start rebuilding their credit, as well as car loans to people in proposals. If you’re currently in a consumer proposal in Ontario and looking for a personal loan, we can help.

Please call Prudent today: 1-888-852-7647.

 

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