Have you recently completed a consumer proposal? Congratulations, by the way, dealing with debt and the effects it can have on your credit score is not easy!
Now you’re probably looking to take back control of your finances and may even be in the market for a new loan to make a purchase. Loans after a consumer proposal can be tricky, but not impossible. Keep reading for everything you need to know.
What Is A Consumer Proposal?
With a consumer proposal, a Licensed Insolvency Trustee sets up a legal agreement between you and your creditors. The goal is to repay part of or all of what you owe. They may also negotiate more time to pay it off. In some cases may also ask to lower or stop any interest accumulation of interest. Generally, a consumer proposal takes 3-5 years to complete and is a good way to pay off unsecured debts. Moreover, it protects you from collections agencies and creditors who may have been harassing you to pay back the debt.
Consumer proposals are not only a better option for consumers but also work in the creditor’s favour. More often than not, creditors get back more money than they would have if you filed for bankruptcy.
How Will A Consumer Proposal Impact Your Credit Report
Consumer proposals do have a negative impact on your credit report. However, if you are at a point where you need to take this option, chances are you already have a really bad credit score in the first place.
When you are completing a consumer proposal your credit report will reflect it with an R7 rating. After you have completed a consumer proposal, a note remains on your credit report for three years. This will significantly impact your ability to get a loan during that time period.
Can You Get A Loan After A Consumer Proposal?
Yes, you can get a loan after completing a consumer proposal, but your chances of qualifying for one will be low due to the impact it has on your credit. As a result, you’ll likely only be able to get a loan from subprime lenders who often charge high interest and fees.
Mortgages After A Consumer Proposal
Getting a loan from a private mortgage lender is possible, even if you previously filed for a consumer proposal. Many of these private mortgage lenders will take your credit with a grain of salt. Instead, they base their approval on your overall financial health. They will consider financial factors such as your income level, debt level, and employment stability. To help you find the best mortgage lender, it may be wise to use a mortgage broker to help you curate a list of potential lenders for you.
Car Loan After A Consumer Proposal
Auto loans may be one of the more accessible loans you can get after a consumer proposal due to the security it provides. Car loans are secured by the car you are buying, meaning, if you miss any payments, the lender can seize the car from you and resell it to recoup payment. Moreover, if you place a larger down payment, your lender will be more willing to provide you with the car loan, as there’s less risk of you owing more than what the car is worth.
Personal Loan After A Consumer Proposal
It is possible to get a personal loan after a consumer proposal, however, you can expect to be hit with high-interest rates, high fees and shorter terms. Moreover, your lender may require some form of security before extending the loan. This may include physical collateral like a house or car. You could also add security by getting a co-signer or a guarantor.
Credit Cards After A Consumer Proposal
While an unsecured credit card may be hard to qualify for after a consumer proposal, you could try applying for a secured credit card. Secured credit cards work just like regular credit cards except they require a security deposit which also acts as your credit limit. These credit cards usually have a lower interest rate and don’t offer points like regular credit cards. They are best for those looking to build credit as it reports payments to the credit bureaus and has very low qualifying requirements.
Can You Get A Loan To Pay Off A Consumer Proposal Early?
Yes, there are certain lenders that offer specialized loans to help you pay off your consumer proposal early. While these loans come with high-interest rates, it can be worth it to mitigate the impact it has on your credit score.
By paying off your consumer proposal early with a loan, you’ll be able to remove the R7 rating on your credit report faster. However, it’s important to remember that, if your financial situation is the same as before and are unable to make payments, you can end up in more debt than before.
How Can To Get A Loan After Consumer Proposal?
It is difficult to get a loan anywhere when you can’t pass a credit check. However, there are a lot of private lenders who will give you a loan after the consumer proposal. Although the interest rates are high, you don’t have many options, so these private lenders are your best bet.
However, just because you have a down payment or are willing to pay high-interest rates doesn’t guarantee that you will get a loan from a private lender. These private lenders have certain criteria that they expect you to meet in order to qualify for their loans. In order to qualify you typically need:
- A job and a verifiable income. If you don’t have either, you will be hard pressed to find anyone willing to lend you money.
- A low debt-to-income ratio. If you owe more money than you have coming in, you’re not a good risk.
- Proof that you are making your proposal payments. You need to show them that you are making these payments on time every single month.
3 Steps To Get A Loan After A Consumer Proposal
How To Apply For A Loan After A Consumer Proposal
Consumer Proposal Loan FAQs
Can I get a mortgage after completing my consumer proposal?
How long will it take to get a good credit score after a consumer proposal?
Can I get a loan from a bank after a consumer proposal?
Can I get a loan while still in a consumer proposal?
Bottom Line
If you do get a loan through a private lender, make sure you make your payments regularly and don’t fall back into old habits. The goal is to rebuild your credit, not wind up right back where you started. Regardless of whether you get a loan, now is a really good time to set up a budget and cut back on some of your expenses, so that you can pay off your consumer proposal faster and get a head start on your financial future.
