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Are you currently working through a consumer proposal? While a consumer proposal provides borrowers with a great way to pay off their debt, their often long, lasting up to 5 years. But what happens if your income increases or you happen upon some windfall, are you able to pay of your consumer proposal early?
If you come across a financial windfall or your income improves at some point, you can use the funds to pay off your consumer proposal early without penalty.
If you have the financial means to repay your consumer proposal off before it’s officially due for repayment, consider doing so. The sooner you complete your consumer proposal, the sooner you can start rebuilding your credit.
If you’re looking for ways to pay off your consumer proposal faster, consider the following tips:
While a consumer proposal generally involves monthly payments, you can also increase them to bi-weekly (one payment every 2 weeks). This will allow for one extra payment per month.
One way to pay off your consumer proposal earlier than its original completion date is by increasing the amount of your payments. Just a few extra dollars per payment can make a significant difference over the long run and help you repay your consumer proposal early.
Just make sure you’re certain that paying your proposal off sooner won’t compromise your budget.
Another benefit to consumer proposals is that they allow you to pay in lump sums throughout your payment schedule. So, if you receive a work bonus or any extra income, you can put it toward your proposal and pay it off earlier. If you want, you can even pay off your total debt in one go.
You can free up some extra money to repay your consumer proposal by liquidating valuable assets. The entire proceeds from the sale can be used to help pay off your proposal early.
However, be careful if the assets you’re considering selling are currently being used as collateral for secured debts.
A consumer proposal only handles unsecured debts. As such, selling assets that are backing secured loans means you’ll have to pay off the secured debt in full from the proceeds of the sale first. If there is any money left over, then you can use it to pay off your consumer proposal.
Yes, you can use the money in your RRSP account to repay your consumer proposal off before the completion date. However, there are a few reasons why this might not be the best route to take:
Technically, you can take out a loan and use the funds to repay your consumer loan early. There are some lenders who offer loans specially designed to pay off your consumer proposal faster.
Some consumers may consider this option as a way to eliminate their consumer proposals sooner rather than later so they can start rebuilding their credit. Timely payments made towards paying off the consumer proposal loan can also help build your payment history.
However, taking out a consumer proposal loan has its risks, such as the following reasons:
If you own a home and have built up some equity in it, you may be able to tap into it and use the funds to repay your consumer proposal early.
However, it’s important to understand the potential ramifications of using your home equity for this purpose.
Filing for a consumer proposal is meant to help you eliminate all your debts. Once you complete your consumer proposal, you’ll need to deal with these additional secured debts, along with the interest and risks of repossession if you fail to keep up with the payments.
Instead, you’d be well-advised to dedicate your finances to paying off your consumer proposal without taking on additional debt.
Yes, it can certainly be beneficial to pay your consumer proposal ahead of schedule. However, before you try it, make sure you understand the potential consequences. While we’re going to list some of those consequences below, always discuss the idea with your insolvency trustee before you make your decision.
There are a few situations where it might make sense to pay off your consumer proposal early, including the following.
As we mentioned, a consumer proposal is one of the most drastic debt elimination steps you can take. Nonetheless, it is still less harmful to your finances than declaring personal bankruptcy.
In the case of a bankruptcy, you’ll also be filing a legally binding agreement, as well as making scheduled debt payments to an insolvency trustee. Additionally, you need to be at least $1,000 in debt and any collection efforts, mounting interest, penalty fees, and wage garnishments should cease.
In many cases, it might be a good idea to pay off your consumer proposal early. You can start rebuilding your credit sooner and eliminate one more payment. However, be careful about taking out a loan to repay your proposal sooner, as it could come with financial risks.
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