What is a consumer proposal and how does it work?

When faced with any kind of debt problem, one of the most proactive approaches is a consumer proposal. These consumer proposals allow you to regain control of the situation by making it possible to suggest a direct settlement of your debt with your creditors. Filing for bankruptcy is another option. However, this reactive approach can have other negative repercussions. This option is best reserved for moments when you really are all out of options.

The first thing to remember when you're faced with excessive debt is that all hope is not lost. What many people experience is the endless cycle of making their monthly payments only to use their credit again within the next few days or weeks. By using your salary to pay your debt, it's easy to completely deplete your funds. At this point, when you need to fill your car up with gas or buy groceries, you're obligated to swipe that plastic yet again. Leaving you in the same, or worse, situation, you were when the month began! Rather than continue this endless cycle and allow yourself to become completely dependent on various forms of credit, it's time to take charge and put a realistic plan into action!

Debt proposals allow you to make one monthly payment over a period of no more than 5 years. The amount you pay will then be forwarded to your creditors. When your final payment is made, you no longer need to worry about any debts.

Apart from the simplicity of this option, there are a number of other benefits. This type of agreement is legally binding. You will only end up paying a portion of the total of your debt, and you will do so in a single monthly payment over 5 years or less. When you file for a consumer proposal, your interest will also be frozen which, in itself, is enough to convince anyone that this really is a great deal.

This option might sound similar to a debt consolidation loan. The main difference is that debt consolidation means that you will still be repaying all of your debt plus interest. If you are in over your head as far as debt is concerned, then even these monthly payments could be too much. Consumer proposals are significantly easier on your pocket, and they make it that much easier to pay off any unsecured debts.

Making a single monthly payment that suits your budget will mean that you can allocate part of your budget to pay off your debt and the rest can be used to cover other costs. Depending on the amount of debt you need to pay and your monthly income, you might need to hold back on luxury items at least until your debt is under control or paid off. In the end, these sacrifices will prove more than beneficial.

When you do decide to apply for any other line of credit, make sure that you do plenty of research. At Wallet Savvy, we offer comprehensive and detailed information on the top Canadian credit cards. Compare benefits, fees, and more in a matter of clicks and remember to always spend responsibly.