Can I Pay Off My Consumer Proposal Early?

When you’re entering a consumer proposal, you’re typically looking at a 60-month term to pay it down. Five years is a long time in anybody’s life, and having an active or recent consumer proposal on your credit bureau can have a serious impact on your ability to access financial services and credit – not to mention the stress of keeping on top of your monthly payments. All of that may leave you wondering: Can I pay off my consumer proposal early?

The short answer is yes. If you have extra income and you want to pay off your consumer proposal early, you can certainly do so. 

What are the options for paying off your consumer proposal early?

You have a couple of choices when it comes to paying off a consumer proposal early. Suppose you’ve increased your monthly income (for example, through receiving a raise at work). In this case, you can amend your consumer proposal to accelerate your monthly payments and pay more each month. For example, if you’re currently paying $200 a month and you get a raise, you could up your payments to $250. You can also add smaller extra payments without amending your proposal, and these will serve to put you ahead of schedule on your consumer proposal.

If you have come into a more significant sum of money (for example, through inheritance or your tax return), you can also make a lump sum payment. So if you got $1,000 back on your taxes, you could choose to use all or some of that money to put towards your consumer proposal.

There are no penalties for paying off your consumer proposal early. The real question is, should you?

The advantage of paying off your consumer proposal early

Many people in consumer proposal are eager to get it paid off as quickly as possible for it’s own sake – it’s a major goal to achieve. Not only will you be rid of the stress of the monthly payments, but you also typically see an immediate increase in your credit score. After you finish paying off your consumer proposal, the debts you’ve been paying off will be marked as “settled” on your credit bureau. 

A consumer proposal remains listed on your credit report for three years after you finish paying off your debts, up to a maximum of six years. You’ll see another big jump in your credit score when your consumer proposal falls off your credit report.

If you pay extra money towards your consumer proposal regularly or in a lump sum, it will put you “ahead of schedule”, giving you some leeway if you need to skip a payment in the future. We would never advise a person to miss a consumer proposal payment if they can avoid it, but if you have built up extra payments with your trustee, they can use that money to cover a future payment if you need to.

For example if your proposal payment is usually $300 and you have paid an extra $500 towards your consumer proposal, the trustee can take a payment from your “extra” payments to keep you on track if you were otherwise going to miss your payment. Your monthly payment will be met and you’ll now be $200 “ahead of schedule”.

Is paying your consumer proposal off early worth it?

Most people want to pay off their consumer proposal as quickly as possible so they can get their financial lives back on track and under control… but paying off your consumer proposal off early won’t save you money. You’ll still have paid the same amount overall.

The other thing to think about as you make an early repayment plan is to remember that making extra payments won’t positively affect your credit score—additional payments on your proposal aren’t reported to the credit bureaus.

There are also risks to paying extra funds towards your consumer proposal instead of using them to build up your savings. While you may feel you have enough money to increase your payments or pay a lump sum now, if you direct your maximum cash flow to paying off your proposal, you won’t be able to access those funds for an emergency like a car repair.

We all know that life can throw us curveballs. If your circumstances change or you have an unplanned expense, will you still have enough cash to meet your expenses?

If you default on your consumer proposal, your creditors may not accept reducing your monthly payments, and you could end up filing for bankruptcy.

Making the right choice for you 

If you’re confident you can afford the extra cash towards your consumer proposal, and it’s crucial for
you to get your consumer proposal paid off early, doing so may be the right decision. 

However, Climb’s Accelerator Plan may be a better way to reach your goals. 

Imagine you have that extra $200 a month in income. Instead of using it to pay off your consumer
proposal each month, you could instead enroll in the Accelerator Plan. Every time you make a payment,
Climb reports that to the credit bureaus—helping you establish a positive payment history every
month. 

The Accelerator Plan also helps you save money for a rainy day. If you need to access your equity early,
we make it easy. If you complete your contract in full, you’ll get your equity back, and you can choose to
use it to pay off your consumer proposal early or put it towards something else. Either way, you’ll have
the added benefit of a positive payment history on your credit report. 

Learn more about Climb’s Accelerator Plan by starting with a free credit consultation with one of our
experts.

*

Author: Climb

How Do You Protect Yourself in a Data Breach?

You’d like to think you’ll never be involved in a data breach, but the sad reality is that data breaches are happening all the time these days. A quick search online will bring up plenty of recent examples. Personal information that may be compromised in a data breach includes names, dates of birth, addresses, SINs and even credit card details. That begs the question, how do you protect yourself? Thankfully there are things you can do to be protect yourself if you’re ever a victim. Here are four simple ways to protect yourself in a data breach.

Fraud Alert

The first thing you can do is place a fraud alert on file with the credit reporting agencies Equifax and Transunion. A fraud alert is a great way to protect yourself in the event of a data breach. When a creditor pulls your file, they’re supposed to take extra precaution before approving your credit application. That means calling you on the phone to confirm your identity. This should help stop anyone who tries to a fraudulently use your personal information to obtain credit.

Credit Monitoring

While fraud alerts helps immensely, another way you can protect yourself is by signing up for credit monitoring. With credit monitoring, you can regularly check your credit history. Although it won’t stop fraud, it’ll help you spot anything suspicious. If you see anything fraudulent on your credit report, you can report it to the police.

Change Passwords

Sometimes it’s not just your name, address and personal details that are compromised. If you use your online password for more than one website, your other accounts could be compromised too if the fraudsters gain access to your email address or bank account. As such, it’s a good idea to change any of your passwords associated with the data breach. It’s better safe than sorry as the saying goes.

Credit Card Alerts

Credit cards alerts are another great way to prevent fraud. Usually there’s a bit of lag between when a data breach is discovered and when it’s made public by the company involved. As such, your credit card details may have been stolen without you even knowing it. However, by adding an alert on your credit card, you can help protect yourself. You can add an alert by text message or email every time someone makes a purchase on your credit card. If it’s too much, you can set it up so you only receive an alert for purchases over a certain threshold.

Most of us don’t check our credit card statements every single day, but by setting up alerts, you’ll know right away if someone is going on a shopping spree at your expense instead of days or weeks later.

Are you looking for other ways to protect yourself in the event of a data breach? Contact our offices today for some assistance.

Climb’s Personalized Credit Prescription provides you with customized recommendations to help rebuild your credit score.

About the Author

Sean Cooper

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedIn, Twitter, Facebook and Instagram.

What is a Credit Builder Account?

What is a Credit Builder Account?

With bad or little to no credit history getting a loan may seem impossible. A Credit Builder Account is designed to help you boost your credit score which makes approval for loans, mortgages and credit cards, more likely.

A Credit Builder Account (also known as Credit Building Loan, Fresh Start Loans, Credit Rehab Savings Program) is one way you can start building a strong credit history. The amount borrowed is held in a secured account while you may payments towards the total amount. Every payment is reported to the Credit Bureau which results in establishing positive credit. When the loan is paid off, the money is deposited into your account.

Having a good credit score is more important than you think. Lenders will always take into consideration your credit score before approving you for a loan or mortgage and to determine affordable interest rates. While it seems like a hassle, it is necessary to take the time and look for ways to can improve your credit score.

How a Credit Builder Account Helps Boost your Credit Score

A Credit Builder Account helps consumers build their credit history by providing the opportunity to make small monthly payments into a secured savings account. By making scheduled payments, positive monthly reports will be sent to the Credit Bureau, resulting in an increased credit score.

Once the Credit Builder Account is paid off, the initial amount is released to you and deposited into your bank account.

Most Credit Builder Account loan amounts are on the smaller side, ranging from $1,000 – $10,000, which means small monthly payments are manageable. Interest rates can range from as low as 5% all the way up to 17.99%.

The Credit Builder Account terms also vary depending on the lender, ranging from 12 months all the way to 60 months.

For the Credit Builder Account to help boost your credit score, you MUST repay the loan on time. It is with positive payments that the lender will file good reports to the Credit Bureaus which in turn will lead to improvement of your credit score.

How to Find a Credit Builder Account Provider 

Credit Builder Accounts are generally offered by smaller financial institutions and online lenders. Be sure to compare different loan providers and choose a Credit Builder Account that you can easily afford. It is important that you commit to repaying the loan on time so that you can register good ratings on your credit score.

Also, try to look for lenders with added benefits. Climb offers free Credit Consulting to anyone. Their goal is to help Canadians build better financial futures and start the process with a Credit Bureau and Budget Assessment. If you are looking for a customized plan to help you get back on track, Climb is the place to go.

Capital One also offers a Secured Credit Card to help boost your Credit Score. Similar to a regular credit card except that approval is guaranteed as you secure the card with some of your own funds. Monthly payments are also reported to the credit bureaus, impacting your credit score.

Pros of Credit Builder Account

  • You will develop good savings habits, as a Credit Builder Account forces you to save money
  • Easy to apply for
  • When you have paid off the loan amount, the money is deposited into your account
  • As you make monthly payments, you will learn financial discipline
  • With a higher credit score, you will be more likely to be approved for a loan, mortgage or credit cards and receive better interest rates.

Cons of Credit Builder Account

  • Late or missed payments will be reported to the Credit Bureau and will negatively affect your score
  • Credit Builder Accounts are not free, so be sure to ask about fees. They could be referred to as set up, admin or application fees and vary from lender to lender.

Is Perfect Credit Necessary?

Guest written by our friends at LoansCanada.

Is Perfect Credit Necessary?

Getting by without credit is rare for most people these days, especially in Canada, where credit cards and loans are two of the main ways that people deal with unexpected costs and sometimes even day to day expenses. So, when it comes to the health of your credit, is good credit enough? Or should we all be striving for perfect credit?

Check out these five healthy credit boosting tips.

What Are Your Credit Score and Credit Report?

In the world of credit, your credit score and credit report are important when you’re trying to get approved for most credit products, such as installment loans, lines of credit, and mortgages. That’s because both elements showcase your ability as a credit user.

When your first credit product gets activated, your creditor will send your information to either one or both of Canada’s major credit bureaus; Equifax and TransUnion. Typically, both bureaus will have a slightly different version of your credit score and credit report on file. When you apply for a new credit product, your lender may ask to pull your credit as a way of calculating your creditworthiness.

Your Credit Score

A three-digit number ranging from 300-900, your credit score is one of the first things that any potential lender will look at when considering you for new credit. Like a grade-point-average, your score is a basic way of depicting your credit health. Every good credit action you make will elevate your credit score, leading to all sorts of possibilities and benefits down the line. The further your score climbs toward 900, the better your approval results will be.

Your Credit Report

In many ways, your credit report is even more important than your credit score. That’s because your report is a detailed file that contains a history of all your credit usage spanning over a predetermined number of years. Essentially, if your score is like your grade-point-average, then your credit report is like your report card.

Although your credit score gives a lender a simplified look at your creditworthiness, your report is used to get a detailed picture of the way you have handled credit in the past and the way you might handle it in the future. Your report also details your status of residency, social insurance number, and other kinds of personal information. For the best approval results and interest rates, it’s best to have a clean and healthy-looking credit report.

Why Good Credit is Important

Generally speaking, good credit qualifies as having a credit score that falls somewhere between 700 and 900, although it’s important to keep in mind that what passes as good credit will vary from lender to lender. A good credit score implies that you have been and will continue to be responsible with all your active credit accounts. Good credit is also important because:

  • Less risk is imposed on the lender, so you’ll be more likely to qualify for a lower interest rate. The lower your interest rate is, the more money you’ll effectively be saving over time.
  • Good credit means you are responsible and gives you the best chance at being approved for any credit product.

Is Perfect Credit Necessary?

Having perfect credit, often represented as having a credit score above 800, is a surefire way of getting approved for any credit product on the market and saving money on interest. However, whether perfect credit is necessary really depends on what kind of credit product you’re applying for, how much credit you’re requesting, and the type of lender you’re applying with.

For example, if you plan to apply for a mortgage through your bank, your credit health would need to be next to perfect, because banks have high approval standards and a mortgage involves a significant amount of money. The more of a risk you pose as a client, the less likely they’ll be to approve you. On the other hand, applying for a small loan or traditional credit card poses far less risk, so perfect credit isn’t necessary.

All this said, there are plenty of other organizations that you can apply with if your credit is less-than-perfect, such as alternative, privately funded, and bad credit lending institutions. Just know that while your approval would be more likely with such places, your interest rate may be less affordable. This is one of the main reasons why all Canadian consumers should keep an eye on their credit and implement healthy financial habits so that they can build and nurture a good credit score.

Is Perfect Credit Worth Being in Debt?

The simple fact is, the more credit you use and the more loans you take on, the more opportunities you create to build and improve your credit. For those consumers who are looking to grow their credit, it is all too easy to become fixated on the idea of perfect credit. It’s important to keep in mind, while good or even great credit can help you achieve financial goals and creates opportunities, racking up excessive debt just to see a three-digit number rise, is not worth it.

Learn how to improve your credit score without increasing your debt, click here.

When All is Said and Done…

Perfect credit, while it may seem beneficial, is not necessary. In fact, it can be quite difficult to obtain “perfect” credit in the first place. So, if your credit score isn’t in the high 800’s, there’s no need to worry. Instead, aim to have healthy financial habits that lead to good credit.

The Good Side to Loan Denial

Being turned down for a loan can be emotionally and financially straining.

While it is not easy to always look at the positive side, being turned down for loans can be a good thing. Loan denial tells you that there is a problem with your credit and financial situation. It should be a warning sign that it is time to learn more about your financial situation and understand why you were denied. Understanding how lenders view your credit report is critical and will set you up for success the next time you apply for a loan.

You’ve been Denied. Now What?

1. Understand why you were denied

You can contact the lender, and they will provide you with an explanation as to why you were denied a loan.

Common issues of what went wrong with your loan application:
  • Poor Credit Score: Your credit score is the number one reason a lender would deny you a loan and is the backbone of your overall credit history.
  • Errors in your credit report: Review your credit report of any errors. If you can identify an issue, you can dispute it with either of the two credit bureaus in Canada: Equifax and TransUnion.
  • Limited credit history: If you have little or no credit history, lenders are more likely to deny you a loan. To build your credit score, consider applying for a Credit Building Program/Account or a secured credit card. Both products are highly recommended for people with poor, little or no credit.
  • Incorrect information on your application: Double check all your information before applying.
  • Perceived high financial risk: If your expenses are higher than your income, a lender may view this as high risk.
  • Did you meet basic requirements: Most loan applications come with a minimum age, income level, and other conditions. Make sure you meet the requirements.
Your Credit Score
Five main factors are impacting your credit score:
  • Payment history
  • How much credit you have available
  • Credit history
  • Types of credit (loans, credit cards, etc.)
  • Too many inquiries on your credit profile

2. Review your Credit Report

You can see where you stand with your credit score by getting a credit report, which is a summary of your borrowing history. You should review your credit report for accuracy.

Several online sources do this at no cost, as well as TransUnion and Equifax.

You should review your credit score at least once a year to make sure the information is correct. If you are planning an important financial decision over the next few months, be sure to review your report ahead of time and make any necessary steps to ensure your score is optimal.

3. Address your Finances

Once you’ve gone through the process of understanding why you were denied for a loan, review your credit report and have a clear picture of where you stand financially, you can now move on to developing a plan on how to rebuild your credit to help prevent another loan denial.

Focus on improving your financial situation, paying down debt and improving any other issues that are affecting your credit report.

If you are not sure of next steps on how to rebuild your credit, some companies focus on helping Canadians boost their credit score and develop customized plans for you to get you back on track. Climb is an online Credit Building Service with the goal of building better financial futures. They review your credit report, educate you on your credit score (what it means and how to improve) and develop a customized plan to boost your credit score and hopefully, get you approved on your next loan.

Another solution, if you are looking for a quick fix, could be the Capital One secured card. Using this card responsibly will help boost your credit score and result in positive payments on your credit report.

If waiting to rebuild your credit score is not possible because you need money now, you could consider using savings, borrowing from a family member or a friend or asking your employer for an advance and working out a payment plan.

Being turned down for a loan can be discouraging, however, take this opportunity to take a hard look at your credit and financial situation and put a plan in place to improve your credit score. By doing so, you will improve your chances of being approved for a loan in the future.