How Does Consumer Proposal Affect Your Credit?
What Is A Consumer Proposal?
A consumer proposal is a formal process that is legally binding and requires a Licensed Insolvency Trustee or LIT to administer it. The proposal is made when someone is unable to pay off their debts. It involves allowing the indebted individual to pay their creditor/s a percentage of what is owed, or the allowance of an extension on the time within which the debt was to be repaid. This affects an individual’s credit rating.
The credit rating is a measure of an individual’s ability to pay off their debts or fulfill their financial commitments. This rating is measured according to past records of an individual’s payments and the present status of any active loans.
How Do Consumer Proposals Affect Credit Rating?
Since the consumer proposal by default is made due to one’s inability to timely or completely pay off existing debts, this will result in an individual’s credit rating suffering a decrement. Simply put the individual’s future loan requests will be assessed as high-risk ventures by lenders. It is not impossible to obtain a loan/credit with a low credit rating. However, it will be impossible to get good interest rates. Furthermore, those seeking new employment will face significant difficulty should their prospective employers ask to review their current credit rating.
Will The Record Of A Consumer Proposal Last Forever?
In short, no. Since the final payment, it takes three years for a consumer proposal to be taken off an individual’s credit score. After that, you can rebuild your credit rating by efficiently and timely fulfilling remaining and future financial obligations, and completing any remaining loan repayments.
When must one consider a consumer proposal or when is one eligible
for a consumer proposal?
In order to make a consumer proposal an individual must have accumulated debts no greater than $250,000, and this excludes a mortgage. You are also required to have a reliable source of income which will allow you to complete all payments on time. The consumer proposal is evidently a much better alternative to filing for bankruptcy.