Can you get a loan during or after a consumer proposal?

A consumer proposal can help you get out of debt and get your finances back on track. But it also hurts your credit score, so if you find yourself short on funds, you might find it difficult to qualify for a loan.

The good news is that it is possible to qualify for loans while in a consumer proposal.

Summary: What are my options if I need financing while in a consumer proposal?

You have two options if you’re looking for loans while in a consumer proposal:

• Loans from online and payday lenders
• Credit counselling

While you won’t qualify for a loan from a traditional lender, you may be able to find funding from payday loan providers and online lenders that work with bad-credit borrowers. You may also be able to increase your chances of getting approved by applying with a cosigner or providing collateral for a secured loan.

However, it’s not recommended that you borrow money—especially through high-interest loans—while you’re in a consumer proposal or soon after completing a proposal. Instead, first try to identify and fix the financial issues that led you to enter a consumer proposal in the first place. That’s where expert advice from a credit counsellor can help.

Must read: Where to get free credit counselling in Canada

Can you get installment loans while in a consumer proposal?

Many lenders don’t offer loans for people in a consumer proposal, but there are some lenders who may be willing to work with you. Some online and alternative lenders specialize in loans for people with bad credit and offer fast access to funds. These lenders will look beyond your credit report and consider your income and employment situation when deciding whether to approve your loan application.

But there are a few key things to watch out for:

• High rates. The lender will likely view you as a high-risk borrower due to your poor credit history, so your loan will have a high interest rate. Learn more about the latest personal loan rates.
• Fees. Check the fine print for any fees that apply to your loan, such as origination, late payment and NSF fees.
• Income and employment. To get approved, you’ll typically need to be steadily employed and earn sufficient income to afford loan repayments as well as your consumer proposal obligations.
• Scams. Watch out for sketchy lenders. Research the lender thoroughly to make sure it’s a reputable provider.

Can you get a payday loan while in a consumer proposal?

Yes, it’s possible to get a payday loan while in a consumer proposal. Payday lenders have very lenient eligibility criteria and usually don’t conduct credit checks. So, if you have sufficient income to cover your loan repayment, you can qualify for a fast payday loan.

Loans of up to $1,500 are available, and the money you borrow will usually have to be repaid by your next payday. But there are two downsides:

• Payday loans are very expensive. Depending on where you live, the lender can charge you $14 to $17 for every $100 borrowed.
• Short repayment periods make it difficult to spread out loan repayments, so you could end up in even more financial trouble.

That’s why you should consider a range of payday loan alternatives before applying.

Related: Compare payday loans

Can you get a student loan while in a consumer proposal?

It’s possible to get a student loan while in a consumer proposal, but you may find it difficult to get funding. A consumer proposal significantly hurts your credit score, so you won’t be spoiled for choice when comparing loan options.

You’ll also need to watch out for high interest rates. Because the lender will see you as a high-risk borrower, expect any loan offers you get to come with high interest rates.

Dive deeper: How to get a student loan in Canada

Can you get a car loan while in a consumer proposal?

Yes, you may be able to get a car loan while in a consumer proposal. While the negative impact a proposal has on your credit score will once again limit your financing options, you can still get approved for funding.

Because the vehicle you buy with the loan is also used as collateral for the loan, the lender’s risk is reduced. If you default on the loan, the lender can repossess and sell the vehicle to recover its losses, so this helps your chances of getting approved. But you’ll need to settle for a higher interest rate than you’d get with good or excellent credit.

Related: Bad credit car loans in Canada

Can you get a loan to pay off a consumer proposal?

Some lenders offer consumer proposal loans to help you pay off your proposal ahead of schedule. This might not sound like a great idea. After all, why would you want to take on more debt? But there are some situations where it may be a viable option.

The main advantage of this approach is that it allows you to rebuild your credit as soon as possible. It brings forward the date that the consumer proposal will be removed from your credit file and allows you to take steps to improve your credit score and get your finances in order sooner.

But there’s a big drawback: While a consumer proposal offers interest-free repayments, you’ll need to pay interest on any loan you take out. This could see you end up in an even deeper financial hole, so you’ll need to weigh your options thoroughly before considering consumer proposal loans.

How long after a consumer proposal can you get a loan?

A consumer proposal stays on your credit report for three years after you finish paying it off or six years after you sign the proposal—whichever is sooner. You may still be able to qualify for financing from alternative lenders during this period, but you typically won’t meet the strict eligibility requirements of banks and other traditional lenders.

So, rather than asking, “How long after a consumer proposal can you get a loan?” the question should be, “How long should I wait after a consumer proposal before getting a loan?” While there are lenders that will approve you for a loan right now, you’ll only be able to qualify for high interest rates. Taking on a high-interest loan could see you end up in the same sort of financial trouble that led you to file a consumer proposal in the first place.

Rather than taking out a loan now, take steps to improve your credit score if possible and consider setting up a high-interest savings account. Once you’ve rebuilt your credit, you’ll be in a stronger financial position and might qualify for a lower interest rate on future loans.

Bottom line

There are financing options available if you’re searching for loans while in a consumer proposal, but taking on more high-interest debt is not recommended. So if you can avoid taking out a loan—and access free credit counselling for tips on getting your finances back on track—you’ll be in a good position in the long run.

Frequently asked questions

• Can I get a loan while in a consumer proposal?

  Yes, it's possible to get a loan while in a consumer proposal. While you won't qualify for funding with traditional lenders, some online and alternative lenders that work with bad-credit borrowers may be willing to offer you a loan. However, due to the negative impact of a consumer proposal, any loan you get will typically have a high interest rate.

• Can I get a credit card when I am in a consumer proposal?

  You may be able to qualify for a secured credit card while in a consumer proposal. These cards require you to provide a deposit to get approved, and using your card will help rebuild your credit score.

• What is the best way to build credit while in a consumer proposal?

  A secured credit card can help you rebuild your credit while in a consumer proposal. These cards require you to pay a deposit to qualify for credit, and your credit limit is usually the same as the amount you deposit. You can use the card to pay for purchases and make on-time payments to help improve your credit.

• Can I get a mortgage after I file a consumer proposal?

  It'll be very difficult to get a mortgage after you file a consumer proposal if your consumer proposal is still on your credit report. A mortgage is a large loan, and it's very unlikely that lenders—even private alternative lenders—will take on such a high risk.

• How long will it take me to recover from a consumer proposal?

  It can take many years to recover from a consumer proposal, depending on how long it takes you to pay it off. The proposal will remain on your credit report for three years after you pay it off or six years after signing the proposal (whichever is sooner).