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If you’re currently working through a consumer proposal but find yourself needing some extra help a loan might be the only solution to the financial crisis you’re going through. So, can you get approved for a loan while you’re in a consumer proposal?
If the vast majority of your income is going toward your consumer proposal payments, you might end up with no money left over for your other expenses, or to deal with any unexpected costs that come your way.
While a consumer proposal can be pretty damaging to your credit and finances and many lenders will deny your applications because of that fact, it’s still possible to get approved for a loan under the right circumstances. Even though you would have an easier time getting approval if you wait until your proposal is finished, it can be acquired during your payment schedule. However, that approval will be much more difficult to earn than it would be if you didn’t have that consumer proposal hanging over you.
Here’s what to expect when you apply for a loan during your consumer proposal:
So, we’ve determined that while it’s difficult to obtain, loan approval is possible if you can prove that your consumer proposal has made you a more responsible borrower. Now it’s time to discuss how you should go about getting your loan. Below, we’ve provided a step-by-step process that you can follow to avoid further debt problems or having your application denied altogether.
One of the main problems with getting a loan while you’re in a consumer proposal is finding a lender that will not only approve you but is a legitimate lender. Unfortunately, most prime lenders, like banks and credit unions, have strict regulations for their borrowers, so you may find it very difficult to gain approval from them. In that case, you may have to apply with an alternative, private, or bad credit lending source.
What to Watch Out For With Alternative, Private, And Bad Credit Lenders
Be cautious when trying to find a lender who’ll approve you during your consumer proposal. While approval can be easy enough to get with one of these lenders because they often cater to clients with similar debt-related issues, there are some things that you definitely need to watch out for, including but not limited to:
To avoid these situations, do a lot of research prior to applying. Compare lenders in Canada. Look up customer reviews and check to see that the lender’s company name shows up in the Better Business Bureau database. Remember, if the deal sounds too good to be true, it probably is.
Let’s say you’ve found a legitimate lender who’s willing to grant you a loan. Like with any credit product, you’ll have to go through your lender’s particular approval process.
Factors Your Lender Might Look At During The Application Process
While the application and approval processes vary from lender to lender, yours might be particularly strict simply because of your consumer proposal. However, the main elements of a typical application process will still be present, including but not limited to an inspection of:
Again, as it should be with any credit product, it’s important to prepare yourself properly before you apply. You should even double your efforts, considering how unworthy of credit your consumer proposal will make you appear to be.
Essential Steps To Take When Applying For A Loan:
Another important note: While offering assets or using a cosigner can increase your approval chances and earn you a lower interest rate, severe consequences might arise if you default. If you stop making loan payments, your asset might be repossessed (car) or foreclosed (home) and sold at auction so the lender can recuperate part of their investment. In the case of a cosigner, the responsibility of your payments will fall to them if you default.
It’s also best to realize the potential consequences that one of these proposals can have on your credit health. While it is true that a consumer proposal can eliminate the majority of your debt problems, it can have a cumbersome, lasting effect on your credit.
In this example, we used a $5,000 loan paid monthly with a two-year term to illustrate how credit scores can affect the total cost.
|Estimated Interest Rate Based On Credit Score||Total Interest Based On Lowest Estimated Rate||Total Interest Based On Highest Estimated Rate|
|Poor Credit Score (300 - 559)||18% to 46.96%||$11,981.78||$15,601.48|
|Fair Credit Score (560 - 659)||15% to 35%||$11,636.80||$14,044.47|
|Good Credit Score (660 - 724)||5% to 29.99%||$10,529.13||$13,417.84|
|Very Good Score (725 - 759)||3% to 17%||$10,315.49||$11,866.14|
|Excellent Credit Score (760 - 900)||1.5% to 10%||$10,157.00||$11,074.78|
A consumer proposal is a legally binding agreement between you and your lenders and is administered by a Licensed Insolvency Trustee, a certified agent of the court trained to deal with consumer proposals and bankruptcies. These proposals are reserved for borrowers who have too much debt to handle on their own and therefore need a way to reduce their debt level, while at the same time satisfying their lender’s demand for payment.
While a consumer proposal can be beneficial, like any debt product they do come with some drawbacks that you should consider before you decide to file for one. After all, consumer proposals are not right for everyone. They’re meant to be used by borrowers in very unhealthy debt situations as a last resort before declaring bankruptcy.
Consider these facts before you file for a consumer proposal:
Click here to learn when your consumer proposal will be accepted or rejected.
If you’re in the middle of a consumer proposal and need a loan, Loans Canada can help find you the right financial solution to meet your needs.
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