Options to Consider If You Want to Pay Off Your Consumer Proposal Early

By on December 28, 2020 No Comments
Man and woman are shaking hands in office.

People who have high-interest debts often apply for a consumer proposal to extend the period of their debt repayment or reduce the amount of what they owe. This debt relief option is administered by a Licensed Insolvency Trustee, who helps you develop a proposal or offer to your creditors. Once the creditors agree, the terms of the program can’t be changed.

However, you can choose to pay off a consumer proposal ahead of schedule. The benefit of paying off your proposal early is that you won’t get stuck in debt for a long time. Your credit report will also be cleared of the proposal information sooner, a factor that contributes to rebuilding your credit score faster.

You should develop a monthly budget for your consumer proposal to get rid of it as soon as possible. And you should know about the various options you can take for your consumer proposal’s early payment. Read this guide for that purpose.

What is a Consumer Proposal?

Before delving into the different options for paying off your consumer proposal early, let’s define what this type of debt repayment program is and how it can help solve your debt problem and have a fresh start.

A consumer proposal is an agreement between a debtor and his/her creditors to make right a debtor’s bad debt. It also helps a person who is in debt to steer away from declaring personal bankruptcy. You can also file a consumer proposal if you can’t obtain a debt consolidation loan to pay off your debts.

Qualifications to Get Accepted for a Consumer Proposal

A debtor should meet certain qualifications to qualify for a consumer proposal. Here’s a rundown.

  • You need to have a stable income, which proves that you can pay the consumer proposal.
  • Your consumer debt should amount between $1,000 to $300,000.
  • It’s exclusive to people who are struggling with unsecured debts. Credit card debt is accepted, while a house loan or car loan is not.
  • You can only apply for one consumer proposal at a time.

●      You must participate in credit counselling sessions.

Paying Off a Consumer Proposal Early: Various Options

If you’re dead set on paying your consumer proposal faster, take note of the following options that you can take.

Increase Your Monthly Payments

You can increase the monthly payment of your consumer proposal if your income can afford it. For instance, if you’re paying $250 each month for 60 months, you can add $25 to your monthly payment to reduce the period of your consumer proposal, thereby paying it off faster.

Go for a Biweekly Payment

If the agreement is that you have to pay for a monthly payment of $200 for 60 months, consider making a biweekly payment of $100 instead. In this way, you can add a monthly payment in a year, reducing the consumer proposal period by 5 months.

Making a Lump-Sum Payment

Lump-sum payments are better than many monthly instalments. So, if you have the means for it (e.g., if you get a work bonus), you can pay a lump sum to pay off your consumer proposal early.

Taking Out a Loan

You can find companies that provide loans to pay a consumer proposal. Such loan providers typically market their offerings to help rebuild or improve your credit rating.

The only catch with these loan offers is the interest. In a consumer proposal, you won’t have to worry about an interest that adds to your monthly payments. With loans, there’s an interest you have to pay.

Even if your loan provider leaves the amount you have to pay each month the same as today, there’s still interest that must be paid, which will lengthen the repayment period of your loan.

So, if you’re planning to pay your consumer proposal by taking out a loan, it’s crucial to do the math. Make sure that the loan doesn’t have an interest rate of 20% interest rate or more.

It’s also a must that you have a credit improvement plan, easily available with mortgage brokers. There’s almost no chance to have that kind of plan with unsecured loans. Remember that you’re opting for a consumer proposal to get rid of your debts and not go back to your old situation.

Selling Your House

Homeowners who can tap the equity of their houses take a consumer proposal because they can strike a deal with their creditors to pay what they owe with their homes’ equity.

But what if everything takes a U-turn? For example, you need to relocate or downsize. While still paying your proposal, you may think of selling your house to pay it off faster. Yes, you can sell your home to pay for your consumer proposal early.

Cashing in Your Registered Retirement Savings Plan

There are some financial considerations if you opt to pay your consumer proposal through your Registered Retirement Savings Plan (RRSP).

  • Your employer will have to cease depositing contributions on your RRSP if you choose to cash in your RRSP to pay a consumer proposal until there’s you replace the amount you’ve withdrawn.
  • There are taxes that you need to pay if you withdraw from your RRSP. It means that you have to cash in more than the total amount of your consumer proposal.
  • You should keep the investment on your RRSP, especially if it earns positively. It’s not a smart move to cash it in to make your consumer proposal’s early payment.
  • It’s not good for your retirement to withdraw the funds from your RRSP.


Now you know what the various options to pay off your consumer proposal early are. You can either increase your monthly payment, make biweekly payments, or pay a lump sum to pay it off. Other options are selling your house, cashing in your RRSP, or getting a loan. Speak to a team member today to learn more about paying off your consumer proposal early.



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