Many Canadians confuse these two options.
But they are very different.
What Is Debt Consolidation?
Debt consolidation usually involves:
- Taking out a new loan
- Paying off existing debts
- Making one monthly payment
You must qualify based on credit and income.
Interest usually still applies.
What Is a Consumer Proposal?
A Consumer Proposal:
- Is a legal process
- Reduces the total debt owed
- Stops interest
- Stops collections
- Is filed through a Licensed Insolvency Trustee
It does not require good credit to qualify.
Key Differences
Debt consolidation:
- Requires lender approval
- Full debt must be repaid
- Interest continues
Consumer Proposal:
- Legally reduces debt
- Stops interest
- Stops legal action
Which Is Better?
It depends on:
- Income
- Credit score
- Total debt
- Creditor pressure
A review of your financial situation is essential.