A consumer proposal is a reliable debt repayment plan. Creditors are unable to amend the requirements of your plan after they have agreed to it.

You do, however, have the option of paying off the proposal earlier than the term. The benefit of completing a consumer proposal early is that the information from the proposal will be removed from your credit report sooner, allowing you to rebuild your credit score faster.

Many individuals prefer to get ahead by one or two payments in case of an emergency. If you miss three payments, your proposal will be annulled, which is undesirable from the creditors because it will reinstate all the debts you are attempting to erase.  You are however able to revive the proposal if it is acted on quickly within the same month of annulment. If revived, you are back in the proposal where you left off, saving you from the creditors once again.

You are not compelled to pay off a proposal in advance. It is preferable that you sustain a strong monthly budget during the duration of the proposal rather than worry about paying it off faster. However, circumstances might evolve, having opportunities to pay off the proposal in full earlier than agreed on.

What is a Consumer Proposal?

A consumer proposal is a legal agreement that is held between you and your creditors, that you will pay back a certain percentage of your debt in exchange for having all of your debts erased. If you struggle to make your monthly repayments, a consumer proposal plan offers debt relief while allowing you to avoid bankruptcy.

How to Pay Off Consumer Proposal Earlier

Applicants have up to five years to fulfill the conditions of their consumer proposal, but there is no rule requiring them to complete it within the maximum time frame. You may pay off your proposal earlier if you choose to. Here are some methods for accelerating consumer proposal repayment.

Make Marginally Larger Payments

One way that you might speed up the payback process is to raise the amount of your installments. Even boosting your repayments by $30 or $35 might make a tremendous difference. You should only accept this alternative when you’re confident that it won’t badly influence your budget.

If your earnings improve within your proposal, you may need to consider this technique. One of the major benefits of a consumer proposal is that your payments don’t suddenly go up as you make more money – this is an issue that can emerge with the personal bankruptcy process. So, you can leverage a raise, inheritance or second employment to allow you to pay down your proposal faster.

Make Additional Payments

Typically, consumer proposals are structured so that you pay one single monthly payment. However, if you wish to accelerate your payments, you can convert from monthly to bi-weekly repayments. By increasing the rate of your payments, you can reduce the proposal’s completion time.

Payments in Lump Sums

By paying a lump sum of money, you can accelerate the procedure and shorten your payback schedule. This option is sometimes chosen by applicants who have received a big tax refund, a bonus at work, or an unexpected inheritance.

However, you should only consider this choice if you are certain that it will not severely impact your finances or your capacity to make future payments.

Selling Your House or Assets

If you have some equity in your house, but not enough to refinance and pay off unsecured debt, you may consider a consumer proposal. Most choose to reach an agreement with the creditors to arrange monthly payments equal to the equity because they wish to maintain their home. However, what if your circumstances change? You may be relocating, or it may be time to downsize. You may decide at any moment throughout your proposal to sell your home. In this case you could pay off your proposal in full, earlier than expected. Leaving you debt free.

During a consumer proposal, you have complete control over your assets. Your proposal solely addresses unsecured debts; therefore, you could sell your assets  and utilize the proceeds to pay down your proposal more quickly.

Steps You Should Not Take to Pay Off Your Consumer Proposal

Using an RRSP (Registered Retirement Savings Plan):

Some applicants may consider utilizing their RRSP to accelerate the payment of their consumer proposal. We do not suggest this course of action due to its short and long-term financial effects.

Your untimely withdrawal would be taxable in the year of withdrawal, and your employer may discontinue covering your funds if it is an employer-sponsored RRSP plan. You will deprive your future self of retirement savings in the long run. You will eventually need these savings, and an RRSP is meant to allow them to grow at a quicker rate, tax-free, within the RRSP.

Application for Another Loan

Some applicants may consider taking out a loan and using it to pay off the consumer proposal early. This raises multiple difficulties. First, creditors will probably offer you loans with high interest rates because your credit score may be low.

Second, you are incurring additional unsecured debt to resolve your debt difficulties. It will be more expensive because the loan includes interest, while the proposal does not.

Prior to making any final decisions, it is advisable to consult with a debt expert to see whether this strategy is appropriate in your situation. Speak to one of our debt experts today to receive full guidance on how to get rid of your debts quickly, with methods tailored to your current situation and budget.