The short answer

A bank consolidation loan replaces your debts with one new loan. You still repay every dollar you owe, plus interest, often around 12%. It mostly buys convenience and a lower rate than credit cards.

A Consumer Proposal is different. It is a legal process, filed through a Licensed Insolvency Trustee, where your creditors agree to accept less than the full balance. In many cases you repay only a fraction of what you owe, at 0% interest, in one fixed monthly payment over up to five years.

Rule of thumb: if you could realistically pay your debt off in a couple of years at a lower rate, a loan may be enough. If the debt has become unmanageable, a Consumer Proposal usually saves far more.

How a bank loan works

  • You borrow one new loan and use it to pay out your cards and other debts.
  • You need decent credit and enough income to qualify. Many people deep in debt are declined exactly when they need it most.
  • You repay 100% of the balance plus interest. On $35,000 over five years at 12%, the total repaid is roughly $46,700.

How a Consumer Proposal works

  • A Licensed Insolvency Trustee files a formal offer to your creditors, based on what you can actually afford.
  • Once accepted, interest stops and collection activity must stop. That includes collection calls and wage garnishments for the debts in the proposal.
  • You make one affordable monthly payment, typically for up to 60 months, and the remaining balance is legally written off when you finish.
  • There is no minimum credit score to qualify. It is designed for people whose debt has become unmanageable.

What each one costs on $35,000 of debt

  • Do nothing at around 19% interest: roughly $54,500 repaid over five years.
  • Bank loan at around 12%: roughly $46,700 repaid.
  • Consumer Proposal at 25% of the balance: roughly $8,750 repaid, saving about $26,250.

Your exact proposal amount depends on your income, assets, and creditors, so treat these as illustrations. The savings estimator on our home page lets you try your own numbers.

The trade-offs, honestly

A Consumer Proposal is noted on your credit report while you are in it and for a period after you finish, and your credit rating takes a hit during that time. A bank loan, paid perfectly, is gentler on your credit. But most people considering a proposal already have damaged credit from missed payments and collections. In that situation, the proposal often hurts less than years of continued missed payments, and it comes with a real finish line.

How to decide

Ask yourself two questions. Can you qualify for a loan large enough to cover everything? And even if you can, can you afford to repay the full balance plus interest? If either answer is no, a Consumer Proposal deserves a serious look. On a free call we will show you both options side by side with your real numbers, and we will tell you honestly if a proposal is not the right fit.