Credit Card Debt and Consumer Proposals: Full Guide

Money problems can hit any of us at any time. The stress of overwhelming debt can feel never-ending, but there’s a lifeline called a Consumer Proposal. With one of these, you can bring your debt down without having to worry about adding more. But what is it, how can it help, and can you still use a credit card when you have one?

What’s a Consumer Proposal?

A Consumer Proposal is like a superhero move for your finances. It’s a legally binding agreement between you and your debt holders, crafted to help you when your debts feel like an avalanche. This plan lets you work out a deal that reduces your debt by up to 80% and creates a manageable payment plan, all while protecting your assets.

Why should you consider a Consumer Proposal?

Well, getting a Consumer Proposal comes with a lot of perks that can make your financial life a whole lot easier:

1. Debt reduction

Imagine turning a mountain of debt into a molehill. A Consumer Proposal can help you reduce your overall debt by up to 80% of what you owe.

2. Flexible payments

Say goodbye to those sky-high interest rates. With a Consumer Proposal, you get to work out a payment plan that suits your budget, completely interest-free

3. One-stop debt shop

Managing multiple debts can feel like herding cats. But with a Consumer Proposal, you consolidate all your debts into one simple, monthly payment. It’s like a streamlined debt management system that saves you time and headaches.

4. Choose your timeline

You can pay off your debts over a period of five years, or if you’re feeling extra ambitious, pay it off sooner.

5. We’re in this together

We’re not just here to set up the deal and disappear. We’re your partners on this financial adventure. We’ll walk with you until your last payment.

Can you still get a credit card while doing a Consumer Proposal?

Now, because a Consumer Proposal rounds up all your debt — including your existing credit cards — you might have heard that you can’t use a credit card at all. In fact, when they ask you to cut up your current card, you’re probably asking yourself, “Can I still get a credit card while dealing with all this? What if I need money in an emergency?” Yes, you can! And you have two options:

1. Secured credit cards

These cards can be a helpful stepping stone for anyone looking to rebuild their credit. When you apply for a secured credit card, you’re typically required to make a cash deposit as collateral. The amount of the security deposit is often equal to or slightly greater than the card’s credit limit and is held by the issuing bank as security in case you fail to make payments. When it comes to secured credit cards, your credit limit is determined by the amount of your security deposit. For example, if you provide a $500 security deposit, your credit limit will typically be around $500.

2. Credit-building credit cards

These cards are specially designed to provide a second chance for individuals wanting to improve their credit histories. While these cards might have lower credit limits and slightly higher interest rates, they are a path to a brighter financial future. When you use them responsibly, they become a tool for rebuilding your credit history. It’s like hitting the refresh button on your financial journey.

Regardless of which card you choose, use it responsibly. Make small buys and pay off the balance every month. One of the best ways to improve your credit score while spending responsibly is to pay off your bills on your credit card. Since you have to pay these monthly — and since it’s something you’re probably budgeting for – putting them on your credit card and paying it off each month means you won’t be adding to your debt, you’ll also be improving your credit score.  

The bottom line

A Consumer Proposal is your ticket to financial stability. With Farber’s friendly experts by your side, we can negotiate a manageable debt repayment plan and, eventually, debt freedom. And yes, getting a credit card during and after a Consumer Proposal is totally doable. Just use it wisely!

So, if you’re thinking about getting a Consumer Proposal to get your finances back on track, connect with us today for your free consultation.