What is the Difference Between Consumer Proposal and Debt Consolidation?

Posted on 5 June 2014

When debt begins to pile up and interest payments become too much, what are your options for debt relief? A common phrase you might hear is to “consolidate your debt”. Debt consolidation aims to combine all of your debt into one with the goal of reducing interest. This is done so that you can afford to repay your debt over time while simplifying your budgeting. Another popular form of debt relief in Canada is filing a consumer proposal. So, what is the difference between consumer proposal and debt consolidation?

Debt Consolidation Loan

The most common way to consolidate debt is through a debt consolidation loan with a bank. The bank will review each application and make a decision on whether to approve an applicant for a consolidated loan. Two of the factors the bank will consider are your current employment status and any assets or a co-signor to secure the loan. The reality is not everyone will be approved for a debt consolidation loan if they do not meet the criteria above and you are still paying interest on this loan. So, what is the difference between consumer proposal and debt consolidation? Simply put, a debt consolidation loan lowers your interest rate and combines your debts. Alternatively a consumer proposal, reduces your debts significantly.

Consumer Proposal

If you cannot get approval for a debt consolidation loan, a consumer proposal may be the right solution for your debt problems. With a consumer proposal, your debts can be taken care of through a standard monthly payment that is affordable based on your income and expenses. The total of these payments will be less than your current balances owing, thereby reducing the total debt you pay. Only a Licensed Insolvency Trustee can file a consumer proposal which reduces your principle debts owing and stops interest completely. Your trustee will then propose this offer to your creditors. If the majority of your creditors approve the proposal, all your creditors are bound by it. The best part is you get to keep all your assets. This can lead to much easier budgeting as well as reducing the total amount owing. A consumer proposal can help you with reorganizing your affairs and maintaining a simple budget.

You can read more on consumer proposals or you can talk to our professionals about these or other tips by calling us at 310-4321, email us, or visit our nearest location for a free consultation. You can also fill out our free assessment form online and one of our representatives will contact you directly.

Helpful starting information:

What to Bring to an Appointment

To get the debt help that you need, please bring a list of who you owe and how much to each, a list of everything you own and your monthly household budget. Don’t have everything right away? Don’t worry – We will guide you through each step.

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Your Information

We’ll walk you through our application process. But, if you want to prepare for your debt free assessment consultation in advance, download our information form and fill in what you can.

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How can you compare your debt repayment options if you don’t know how much they will cost you? Your solution will become much clearer when you are able to compare costs.

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If you’re ready to be debt free, it’s time to meet with one of our knowledgeable Licensed Insolvency Trustees at your convenience and get started

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