Once you file a consumer proposal (or personal bankruptcy) there is a note that goes on your credit report saying that you have filed a proposal. So, when you apply for a loan and the lender does a credit check, they will know you are in a proposal, which makes it more difficult to borrow new funds, although it is quite possible you will be able to renew existing secured loans including your mortgage or car loan.
Renewing An Existing Loan
Even if you have filed a consumer proposal, if you are current on your existing mortgage, car loan or lease, you lender will likely be willing to renew your loan when the term comes due. You may not be in a position to negotiate a reduced interest rate or a significant change in terms, however in most instances we find that individuals in good payment standing are able to renew their existing secured loan.
New Loans Or Refinancing
Changing lenders, or applying for new credit, while not illegal, will be difficult while you are in a consumer proposal (or bankruptcy).
If you are borrowing to finance a car, and you have a sufficient down payment, and a good income, you may be able to qualify for a new loan, although you may pay a somewhat higher interest rate.
You may also be able to qualify for a secured credit card as a way to start to rebuild your credit assuming you have saved the necessary deposit.
Before you apply for new credit, here are some things you should consider:
- Ask yourself what caused your financial problems in the first place. Consider why it is you needed for file for bankruptcy or a consumer proposal. Now that you are on your way to a fresh start, you will want to avoid a similar situation in the future.
- Take advantage of the skills taught as part of your mandatory credit counselling sessions, and prepare a personal budget. Work to balance your income and expenses so you are living within your means so that you will not have to rely on credit for everyday living expenses.
- If, and when you do qualify for new loans, use that credit wisely. Only borrow what you can afford to repay.
If you have further questions about how a consumer proposal will affect your finances after filing, contact an Ontario Bankruptcy Trustee for a free initial consultation.