consumer proposal

Debt consolidation versus consumer proposal

Just Looking to Consolidate about $46,000 dollars of debt and pay one lender, Some Stats about me

-Bad Credit(600,Unfortunately had very bad spending habits in my mid 20’s) -On-Going Income, totally fine with paying monthly -Not willing to do a consumer proposal,Just willing to get a loan to consolidate debt -Aware of the borrowing rates currently, Not worried about the prime rate
-Located In Ontario but will take tips and advice from all provinces

Honestly I’m just looking to consolidate it all and focus on paying one lender, I know my credit score is a hassle, but if anyone knows where to find lenders that does this stuff and accommodate a 600 Credit score I would appreciate that, Already looking at budgeting and so forth to get my life back on track!

I’m open to all knowledge,tips and tricks! Thanks for helping out you guys!

Victor Fong, Licensed Insolvency Trustee replies:

To summarize:

  1. You owe $46,000

  2. Your credit score is 600, which is poor

  3. You are “Aware of the borrowing rates currently, Not worried about the prime rate”

  4. You’re not willing to do a consumer proposal

I’m going to answer your post under the assumption that the $46,000 is credit card debt. And the typical rate of interest for a credit card is 20% per year.

First, prime rates generally refer to interest rates on loans secured against real estate, like a mortgage or a home equity line of credit. It doesn’t apply to unsecured loans like the one you’re seeking.

As I write this 7.2% is the prime rate on a secured loan. An unsecured loan would be probably be well over 10%. And that’s if you have a great credit score.

With a 600 credit score, you’d only be able to get a loan with a high interest rate lender such as Easyfinancial.

But their interest rates start at 29.99% per year. And they can go as high as 46.96% per year. This is higher than the 20% interest rate you’re currently paying on your debts.

Suppose that you borrowed $46,000 from them at 29.99% per year and successfully paid it off over 5 years.

If you plug these numbers into an online amortization calculator, you’ll see that in addition to repaying the original $46,000 loan, you’d be paying an additional $43,278 in interest over that 5 year repayment. You’d be paying back $46,000 + $43,278 = $89,278.

The other alternative for you is the one you wanted to avoid: filing a consumer proposal.

You can file a CP to settle your $46,000 debt for anywhere between 25% to 50% of what you owe and paying that settlement off interest-free over 5 years with monthly payments.

The amount your creditors would accept as a settlement will depend on your income, your assets and your cashflow.

Your credit score is already 600 so filing a CP probably wouldn’t make it much worse.

And if you don’t want to resort to filing a CP, you can always buy a lottery ticket and hope for the best.

Good luck 🤞

Victor is the President of Fong and Partners Inc. He is a Licensed Insolvency Trustee and Chartered Professional Accountant. With many years of experience in the insolvency field, Victor has been involved in both corporate and consumer insolvency engagements. Previously with a large national firm, Victor founded Fong and Partners Inc. so that he could dedicate his professional life to help people from all walks of life to deal with their debt.