Before you filed your consumer proposal (CP), your debts were out of control. Your CP gave you relief from your creditors, collectors and even garnishments. It was a very responsible way to deal with your debts – creditors appreciate that.
Once a new reality sets in and you have adjusted to a life of better budgeting and without credit, it’s time to take stock.
Have you had a specific reason to wish your credit history was not in tatters?
Could not rent a place because the landlord was not impressed with your credit history
The bank just smiled when you asked them to increase your mortgage
The cell phone company would not let you buy a subsidized phone and go on a two year plan
The car dealership said “have a nice day” when you wanted to buy a new car
Related article: Impact on your credit history of a consumer proposal
But now it’s time to wrap up the proposal and get on with your life.
Even though most proposals are initially structured as five years in duration, the folks at Hoyes Michalos say the average term to completion in their client base is 3.5 years.
In most markets your home has been blessed with appreciating values over the past few years. Especially in the Greater Toronto and Vancouver regions.
There is potentially lots of equity in your home. Why wait the full five years to pay off your proposal?? Take some equity out of your home now; pay off the consumer proposal now, and get on with your life faster!
In many cases, your monthly cash-flow will improve! It often happens that the incremental mortgage payment you sign up for is LESS THAN the monthly proposal payment.
Related article: He used home equity to pay off his consumer proposal
Maybe you have no plans to ever own a home. But it certainly is possible after completion of a consumer proposal. In fact with a decent sized down payment, some people buy a new home very quickly after they complete the proposal.
But if you are saving for a down payment and you hope to score a high ratio mortgage one day, you need to put some distance between you and your proposal completion date. At least two years. And you had better follow a smart credit history rebuild program at the same time.
If you wait the full five years before you complete your proposal, it may be at least
seven years before you might qualify for a high ratio mortgage.
RECENT CASE – Katie is a late twenty-something who recently filed a lump sum proposal for $13,000. The trustee had suggested a lump sum would go over well with her creditors and they would probably accept less than a five year payment plan. 45 days after the proposal is made, it can be approved.
And within a week or two, Katie’s parents will loan her the money to pay the proposal in full, and Katie will repay her parents over the next few years.
Doing it this way means Katie can immediately:
Overall, that is FIVE YEARS faster than someone who takes the full five years to pay off her proposal
Related article: Buying a house right after a consumer proposal
How to rebuild your credit history quickly – download free information
Apply for an unsecured credit card even if you are in a consumer proposal or bankruptcy
Hopefully you will agree paying off your consumer proposal early is something worth aspiring to. If you would like to understand your options, please contact us. Email is email@example.com; phone is 416-989-1000, or you can chat right away with us – look at the bottom right of your screen!
A useful tip for RRSP contributions – put money in when your personal tax rate is high, and if you withdraw money, do so when your tax rate is low.