Difference between Debt Consolidation and Consumer Proposal

Difference between Debt Consolidation and Consumer Proposal

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An offer made by a borrower to all his creditors is a consumer proposal. Consent to one monthly payment is made in this offer. A consumer proposal has a major advantage; it allows you to pay only a portion of the debt.  On the other hand, debt consolidation gives you an amount to pay your other smaller loans with its proceeds. You can increase your leverage and reduce your interest rate by using a large loan to pay off smaller loans.

All about Consumer Proposal

A consumer proposal can be better than debt consolidation when you decide to merge the credit into a single, and want to lower monthly payment. For a consumer proposal, as with debt consolidation, you are in a position to get benefit from making one combined monthly payment. But consumer proposal gives you an additional advantage by paying a portion of your debt rather than paying the entire amount, as it usually happens in a debt consolidation case.

  • A consumer proposal is free of interest in contrast to debt consolidation where you pay your debt with a lower interest rate. You will take a further consolidation loan with debt consolidation that will continue to run interest.
  • A consumer proposal fixes all your outstanding debt and lets you pay less than your creditors owe.
  • With consumer credit, you can receive low monthly repayment.

All about Debt Consolidation

Debt consolidation is an ideal option for them who have a good credit rating. On the other hand, they cannot eligible for borrowing it. If you have a healthy cash flow to help cover the debt consolidation loan payments, the loan might be a better choice.

Unlike a consumer proposal, your credit history won’t be impacted by a debt consolidation loan. Even though you have to settle the unpaid debt fully, you should be able to settle the debt creatively and stress-free.

When consumer proposal will be an ideal option?

A consumer proposal can be a safer option than debt consolidation in some cases. For example, a consumer proposal may be perfect for you when you have a poor credit background that prohibits you from obtaining a loan. When you are unable to pay the proposed payment with a consolidation loan, you can also make a request for it.

You can choose the ideal option by considering both the benefits and disadvantages of the debt consolidation loan and a consumer proposal.

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