Debt consolidation vs consumer proposal

Debt consolidation and a consumer proposal are two alternatives to bankruptcy that allow you to pay off your debts. However, they are very different processes. The comparison table below will help you to better understand.

In short

Both debt consolidation and a consumer proposal have advantages and disadvantages.

If you have a high credit score and can repay a loan, debt consolidation is the best option. However, if you’ve accumulated a lot of debt and are unable to repay a loan, you should consider a consumer proposal.

Debt consolidation

Debt consolidation is essentially a loan which involves combining all your debts and making one monthly repayment.

To avail of debt consolidation, you must submit an application to a financial institution. If you meet certain conditions, you’ll be granted a loan with an interest rate that’s generally lower than credit cards. une institution financière.

What are the eligibility requirements?

You must have a good credit rating and be in a position to repay the loan.

What are the advantages of debt consolidation?

It simplifies your debt management since you’ll have only one monthly repayment.
It allows you to pay a lower overall interest rate.

What are the disadvantages of debt consolidation?

Unlike bankruptcy, debt consolidation does not eliminate your debts.
Your application may be denied if your financial position is too unstable.

Consumer proposal

This involves a legal agreement between you and your creditors to reduce the amount of your debt. The expertise of a Licensed Insolvency Trustee is required to negotiate and determine an interest-free reduced payment plan.

What are the eligibility requirements?

A consumer proposal is an option for individuals with significant personal debt resulting from credit cards or personal loans, for example.

What are the advantages of a consumer proposal?

It allows you to reduce your total debt (including personal tax debt).
It helps you avoid bankruptcy.
It allows you to keep your property.

What are the disadvantages of a consumer proposal?

It temporarily impacts your credit score (but you can improve it later).
You must agree to respect the repayment plan.

	Debt consolidation	Consumer proposal
Solution	Loan from a financial institution	Legal agreement with your creditors
Amount to be reimbursed	100% of your debt	Amount negotiated by the trustee based on your ability to pay
Interests	Yes, but lower than credit card interest rates	No
Benefits	No impact on your credit score	Avoinding bankruptcy

How can I know which option is best for me?

If you have a high credit score and can repay a loan, choose debt consolidation.
However, if you’re overwhelmed by debt and are unable to repay a loan, opt for a consumer proposal.

In all cases, consulting either a Financial Recovery Counsellor or a Licensed Insolvency Trustee is key. These experts have all the knowledge required to assess your situation and propose the best solution.

And most importantly, don’t wait to take action! Your debts will not disappear overnight and your situation could get worse if you don’t remedy the problem. Our Insolvency Counsellors and Trustees have a personal, judgment-free and confidential approach. Contact us as soon as possible!