Consumer Proposal or Debt Consolidation – Which Makes More Sense?
In our experience, for those looking to get rid of their debt, there is often a lot of confusion surrounding the various options available. With so many different types of debt solutions available, it can be difficult to determine which option is the best. Today, in the hopes of providing some clarification, we discuss two such options: the consumer proposal and debt consolidation.
A consumer proposal is a negotiated settlement with your creditors. This means that you offer to repay a portion of your debts and your creditors agree in order to receive at least a portion of what is owed. There are several benefits to this option. In a consumer proposal, all debt is consolidated into a single, monthly payment, there is no interest and often the debt is reduced. The downside here is that your credit will be impacted. That being said, if you are in a position to seek a consumer proposal, your credit has probably already been affected.
With a debt consolidation, you borrow money to pay off all of your debt. You then repay whomever loaned you the money, with interest, with a single, monthly payment. For example, many people choose to leverage their homes by refinancing their first mortgage or taking out a second mortgage to consolidate debt. With a debt consolidation, the monthly payment will usually be larger than it would be in a consumer proposal (since you are paying back all of what is owed as well as interest), but your credit is less negatively impacted.
Which option is best? We can’t accurately answer that question here. Every person’s situation is unique and your personal circumstances will dictate which option is best for you.
Buyer beware – when you’re struggling with financial decisions such as these, it is best to speak with a financial consultant for guidance to eliminate potential issues. Remember, if you go to a bankruptcy trustee, they will usually offer up a consumer proposal as the best answer because that is what they sell. If you go to a bank, they will offer a traditional consolidation because that is what they sell. A financial consultant can advise you on the best option and negotiate the process for you. There is nothing being sold, so the bias just is not there.
At DebtCare, our goal is to help you get out of debt – that could mean a debt consolidation, a consumer proposal or any number of other options. Our priority is your financial security.
Get in touch today by calling 1-888-890-0888.