How Is a Consumer Proposal Different and also Similar to Debt Consolidation?
For today’s blog post we are going to take a look at debt consolidation as well as consumer proposals. I will explain what they both are and discuss the similarities and the differences of each. Let’s get started.
Consumer Proposal
A consumer proposal is a legal process in which a debtor can strike a deal with their creditors to pay back a portion of what they owe without interest or penalty. The debtor’s unsecured debts are then grouped together into one payment with the repayment period lasting up to 60 months.
Debt Consolidation
Debt consolidation is essentially a loan from a bank or financial institution that will pay out all of a person’s unsecured debts. The debtor then makes one payment to the bank instead of several payments to different creditors, within the terms that they agreed upon. Debt consolidation is a great debt reduction tool for a person who has good credit and enough income to be able to afford the payments of a consolidation loan.
Similarities
A consumer proposal is similar to a consolidation loan in that you make one payment to one institution instead of several different payments to several creditors. In both cases the payment is manageable for the debtor and is paid back according to terms agreed upon by both parties.
Differences:
Consumer Proposal:
-Interest stops accumulating when the proposal
-You pay back a percentage of what you owe
-You must have more debts than assets in order to file a consumer proposal
Debt Consolidation:
-Interest is charged on the loan, but is often lower
is accepted than what was paid to the previous creditors
-You pay back all of your debts in full
-Having assets such as a house with equity, will help you to qualify for a consolidation loan
Just like there are similarities and differences to Consumer Proposals and Consolidation Loans, there are also positives and negatives to each. So which debt help option should a person choose? Well it largely depends on each individual situation. If you need help deciding which option would best suit your needs or have questions regarding consumer proposals or debt consolidation, give us a call at our Lethbridge 4 Pillars office at 403-332-7361.
Our experts will answer all of your questions and point you in the right direction to pay off your debt.
