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Many Canadians are struggling with their money, causing them to look for ways to get out of debt. Bankruptcy is a well-known debt relief option that can safeguard customers from creditors who may seek to file litigation in order to reclaim what is owed to them. However, bankruptcy has its consequences, including the loss of valuable assets and a poor credit rating.
As a result, many people who are in financial trouble strive to avoid filing for bankruptcy. Other solutions, such as consumer proposals, are fortunately available.
A consumer proposal stays on a credit report for three years after it is completed, whereas bankruptcy stays on a credit report for around seven years after it is discharged. As a result, depending on your specific situation and ability to pay your obligations, a consumer proposal may help you create a better credit rating faster.
Regardless of the negative impact on your credit rating, a consumer proposal gives you a fresh start with your finances and allows you to start the process of credit repair sooner than bankruptcy.
Increasing Your Credit Score Following a Consumer Proposal
Naturally, the sooner you finish your consumer proposal, the sooner you can begin rebuilding your credit. Applying for a secured credit card is one of the simplest methods to begin building credit. Before you can start spending with these cards, you must first make a deposit. This deposit effectively serves as your credit limit, limiting your spending to that amount.
You may consistently grow and enhance your credit score if you earn a fair salary and have made the decision to pay your credit card bills on time and in full each billing cycle.
It is, nevertheless, critical to establishing that you are financially capable of making secured credit card payments. If you don’t, you’ll end up causing more harm than good. Furthermore, you should avoid exceeding the credit limit on your secured credit card. Instead, limit your expenditure to no more than 30% of your credit limit, which can help you improve your credit score.
The most crucial aspect of establishing good credit is to make all debt payments on schedule. One missed payment, especially if it is more than 60 days past due, can have a negative impact on your credit. Your payment has the greatest impact on your credit score, so making sure you pay on time is critical.
Car Loans After Consumer Proposals
It is feasible to obtain a car loan following a consumer proposal, but approval may necessitate more effort. In fact, while the consumer proposition is still in effect, it may be possible to obtain an auto loan. There are auto dealerships and lenders that specialise in working with Canadians who are undergoing or have recently completed a consumer proposal.
You’ll need a steady job with a significant income, a low debt-to-income ratio, and proof of timely consumer proposal payments to get authorised for an auto loan after a consumer proposal. In addition, you’ll almost certainly need to come up with a sizable down payment to secure the loan upfront.
Personal Loans After Consumer Proposals
It’s possible to get authorised for a personal loan after your consumer proposal has been dismissed, just like it’s possible to get approved for a car loan.
In this scenario, the same criteria apply, such as a sufficient income, a low debt load, a large down payment, and proof of timely consumer proposal payments.
In comparison to loans issued to those with a high credit score and no history of a consumer proposal, you will almost certainly be charged a higher interest rate.
Mortgages After a Consumer Proposal
Even if you have good credit and a clean credit report, getting approved for a mortgage might be difficult. If you have a bad credit rating, getting a home loan can be difficult.
To maximise your chances of getting approved for a conventional mortgage, you should have a credit score of at least 680.
To make it easier for you to acquire a home loan, you should aim for at least that figure.
Even if your credit score falls below 680, you may still be approved for a mortgage.
There are several lenders out there who work exclusively with low-credit consumers.
Read More: Guaranteed Approval Personal Loans Canada
These alternative lenders will examine your house loan application if you have paid off your previous obligations and are working to restore your credit score.
Alternative lenders who work with clients who have bad credit may prioritise other aspects such as your income, recent payment history, and debt load above your credit score. As a result, before applying for a house loan, you must ensure that all of these variables are in place.
Additionally, you should make every attempt to save for a substantial down payment. In addition to the aforementioned factors, lenders will require a substantial down payment to compensate for your poor credit score.
Ideally, you should save 10% to 20% of your income to lower the amount of money you’ll need to borrow and improve your chances of getting a mortgage.
The Bottom Line
At Lionsgate, we specialize in helping people get the extra cash they need, obtain funding for private mortgages, as well as for other real estate transactions. If you are looking to buy land in Canada, get a mortgage or apply for a loan, fill out the form below. Or, You can leave us a message and we will try to connect you with local lenders and sources that best meet your needs.
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