Now you can listen to our blog post, "How to Get a Farm Mortgage in…
Now you can listen to our blog, “Loans For Consumer Proposal – Can I Get?” while on the go.
If you’re in the middle of a consumer proposal, you may feel compelled to ask for a loan. Perhaps you require some more assistance. In such a situation, a loan could provide you with the financial support you require during this difficult period.
A consumer proposal can be a good approach to lower your debt. In some cases, debt can be reduced by up to 80% with this too. But before delving into the details, let’s find out what exactly it is.
A consumer proposal is a legally binding document that is prepared with the assistance of a certified insolvency trustee who can assist you with your finances and debt.
Your trustee will work with you to produce a document that proposes to pay creditors a percentage of the money due or to extend repayment dates – or both – as part of the consumer proposal process.
Who can use Consumer Proposal? Individuals who are drowning in debt can use a consumer proposal to try to minimize their debt while keeping their creditors satisfied.
Impact of a Consumer Proposal on Credit
You might already know by the definition that a consumer proposal can be the savior. But what impact does it have on your credit? Any potential negative consequences of filing a consumer proposal on your personal credit report should be considered.
Your credit rating will drop to an R7 state during a consumer proposal. This is the third-lowest rating after asset seizure (R8) and bankruptcy (R9).
During a consumer proposal, your credit score is likely to plummet, and it might be difficult to recover.
What impact will a Consumer Proposal have on my ability to get a Loan?
It will be difficult for you to obtain any loans because you are likely to have a poorer credit score. This is because of filing a consumer proposal.
However, it is common knowledge that many who file a consumer proposal are experiencing significant financial difficulties. With the majority of your salary going toward proposal payments, building financial security will be even more difficult.
So, yes, a consumer proposal can harm your credit score. Also, getting a loan authorized throughout the process is impossible even if it is easier once the process is completed.
what to expect when I apply for a loan while in consumer proposal?
If you apply for a loan while in a consumer proposal, you should expect the following:
- Your credit and financial situation will be examined.
- You’ll have to show proof of a consistent income.
- Your lender will need to contact your LIT or consumer proposal administrator to discuss your payment history up to that date.
- Your trustee will not prevent you from obtaining a loan but will work with you to ensure that you do not obtain a loan that is not financially practical for you.
- You’ll have to demonstrate to your administrator or trustee, as well as a lender, that you can handle both loan and consumer proposal payments.
Who Is Eligible to File a Consumer Proposal?
Proposals, as a federally regulated program, have specific eligibility conditions that you must complete in order to file a consumer proposal in Canada:
- You should be able to pay off a portion of your debts;
- You must be insolvent. This means your debts must exceed the value of any assets you own. You must be unable to make timely debt payments;
- Your total unsecured debt (excluding your home) must not exceed $250,000.
- You must be a Canadian resident or own property in Canada.
It is not necessary to be a citizen to file a consumer proposal. You can be a permanent resident or have a work visa or other immigration status in Canada.
A consumer proposal program may be a viable solution for you if:
- Your income is high enough that you would be compelled to make large monthly surplus income payments
- You wish to avoid bankruptcy.
How can I apply for a loan?
If you can show that your consumer proposal has taught you to be more responsible with your money, you could be eligible to secure a loan.
If you’ve reached a point of approval, there are a few things to keep in mind to avoid falling back into debt.
Find a reputable lender
The primary problem with trying to secure a loan during a consumer proposal is that many lenders have very tight criteria that you must follow in order to get a loan. However, it can be tempting for those who are especially vulnerable and desperate to seek a loan from an untrustworthy, private, and bad source.
Be aware of scams
You should be wary of lenders who are quick to accept you since, while you may have received your loan, a poor credit rating may allow lenders to increase the interest rate on your loan, making it more expensive over time.
There are also many scams out there that target weak borrowers and deceive them into thinking they are safe in order to obtain their financial information.
The Bottom Line
At Lionsgate, we specialize in helping people obtain funding private mortgages for land purchases 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, leave us a message and we will try to connect you with local realtors and sourcing for financing.
If you found this article helpful, please share it with someone you care about. Also, visit our blog to read similar articles on mortgages.