Weighing The Odds Of Consumer Proposals

By Author: mohanchen
Total Articles: 434
Comment this article

As recent studies would indicate, the average Canadian households maintains of debt load of more than $14,000.00 and continue to routinely spend more money annually then is brought into the home. Many households are unable to meet their regular monthly obligations and consider the rising debt to income ratio to be a growing concern, one that may warrant considering researching options such as debt consolidation or consumer proposals. While it may be difficult to find a solution the meets their specific needs, it is advisable to act as early as possible to mitigate the risks of the problem increasing.
Skillful financial advisors and money managers often recommend attempting debt consolidation or filing a consumer proposal before looking into more severe solutions such as bankruptcy. The practice of debt consolidation requires the debtor to secure a loan large enough to pay off each of their outstanding debts. The main reason that someone would consider taking out such a loan is to obtain a lower interest rate and consolidate their payments. The chances are good though ...
... that by the time someone has created enough personal debt that they will be unlikely to secure a loan at an interest rate lower than what they are already paying on their debts - that is if they qualify for a loan at all. Those finding themselves unable to secure a loan would be wise to look into filing a consumer proposal.
Filing a consumer proposal not only reduces the need to create more debt but it alleviates the problems associated with consolidation loans. As mentioned earlier, being in debt has negative effects on a person's credit score. Having a poor credit score may limit an individual's ability to obtain a good interest rate making it impossible for them to gain any benefit from a consolidation.
By filing a proposal, those in debt are taking a proactive approach to regaining their credit trustworthiness by admitting that a problem exists. They are not simply washing their hands of their debts as they would be in the case of a personal bankruptcy. Under a consumer proposal, the creditors agree to lower or even stop the interest rate and negotiate a smaller balance in exchange for the person filing a claims agreement to pay back a reduce portion of the debt in regular monthly increments.
Ontario residents filing a consumer proposal are required by law to attend no less than two counseling session with a qualified financial advisor; an important step in enabling them to learn financial responsibility and prevent the need for bankruptcy in the future.
About the Author
Skillful financial advisors and money managers often recommend attempting debt consolidation or filing a consumer proposal before looking into more severe solutions such as bankruptcy. The practice of debt consolidation requires the debtor to secure a loan large enough to pay off each of their outstanding debts.