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6 months ago

Getting a Personal Loan After a Consumer Proposal

by Vinicius Rocha

In this article, we’ll be examining how consumer proposal impacts your ability to be approved for loans, what you can do to discharge your proposal more promptly, and how Magical Credit can help you fix your credit rating after you’ve met the obligations of your consumer proposal.

What Is A Consumer Proposal?

A consumer proposal is an agreement made between a licensed insolvency trustee and your creditors which, through a legally-binding document, requires you to pay off a percentage of your debts or extend the time you need to pay off your debts in full. In Canada, as long as your debts do not exceed $250,000, you are eligible to receive a consumer proposal. It is generally considered to be a last-ditch alternative, as it carries with it significant ramifications for your future credit.

How Consumer Proposals Impact my Credit Report

Even if you have a perfect R1 credit score, consumer proposals will unfortunately cause that score to drop down to an R7 or an R9. After the debt arranged by consumer proposals is paid, it can take up to three years for it to be cleared off of your credit score. With that said, however, a consumer proposal is a far superior alternative to bankruptcy, a status which remains on your credit report for much longer, and which you must disclose whenever you apply for a future loan in perpetuity.

Having low credit makes it more difficult to get approved for loans, and you are unlikely to receive a favourable interest rate even in the event you are approved. Paying debts in full during the consumer proposal may make your score a little bit better, but any late or short payment will make it much worse. We therefore strongly advise doing everything you can do get out of your consumer proposal as soon as it is practical.

Can I Get A Loan While in A Consumer Proposal?

If the majority of your income is being used to pay off your consumer proposal, you may be cornered when faced with personal or unexpected expenses. Getting a personal loan to pay off your consumer proposal may help you get out more quickly, but be warned: taking on new debt to pay old debts is not a sustainable way forward.

Being approved for a loan while under a consumer proposal isn’t impossible, however, as many people are able to get approved for a loan even with a low credit score and while paying off debt. In Canada, in order to be approved for a loan while in a consumer proposal most people need steady income and employment as well as a relatively good financial standing and credit history.

It’s our recommendation at Magical Credit that you wait until you have been discharged to seek a loan. Taking out and then repaying a small short-term loan offers a route to begin rebuilding your credit, and can help offset some of the sacrifices you may have had to make during your consumer proposal period.

What Loan Options Do I Have?

As we’ve noted, when you’ve recently been in a consumer proposal, you may have a hard time getting a loan. Banks and credit unions have strict regulations that may impede your progress.

Private, alternative and bad credit lending companies will sometimes grant loans to people who have been turned down by the “big banks.” These lenders usually look for unused sources of collateral like real estate or invoices, or will accept government-issued compensation. Their payment schedules are usually more flexible than traditional banks’, and they provide you with a larger sum of money upfront than a bank would. These lenders do however look at your credit score when you’re applying for your loan. They judge your loan approval based on your borrowing history and how often you paid back your credit and loans.

Magical Credit does not offer loans to applicants who are currently under a consumer proposal, but we will happily consider you once you have discharged your status, even if you have a rocky credit history. If you have been employed for the last six months, or have regular government benefits (such as EI or a child tax subsidy) you stand a good chance of being approved. Our interest rates compare favourably with those of payday loan companies, and we offer simple tools to help keep you on track of your repayment obligations.

Alternative, private bad credit lenders have financial solutions to offer their clients. But of course, when dealing with any private service, you need to exercise some caution. Be aware that if you have a bad credit score, the lender may attach high interest rates to your loan, making it difficult to pay back on top of the consumer proposal. There are also a lot of “fake” alternative lending companies out there that are out to scam you and charge incredibly high interest rates without warning. Be smart when choosing your lender.

Suggestions for Discharging your Consumer Proposal Status

If you’re currently under a consumer proposal agreement, or considering entering into one, it’s wise to start planning how you’ll find your way out of it. Below you’ll find a few basic suggestions for expediting this process.

Increase the Amount and Frequency of Payments

If you don’t want the burden of worrying about a loan to pay off, you can pay off your consumer proposal faster by increasing your monthly payments. If you increase your payments from say, $475 to $500, you will pay off your consumer proposal earlier without even really noticing. By also increasing the frequency of your payments from monthly to weekly increments, you can align payments with your paychecks and pay off the debt much faster.

Make Lump Sum Payments

Not many people are aware that consumer proposals allow you to pay off your debt in lump sum payments. Whenever you get a work bonus, vacation pay, or any large sum of money, consider applying it directly to your consumer proposal debt. By making some sacrifices in the present, in the future you are more likely to be debt free.

How to Rebuild Your Credit Rating After Paying Off Your Consumer Proposal?

Although a consumer proposal will definitely harm your credit score, it doesn’t mean that it will be entirely impossible to build it back up. Taking out a loan and paying off your debt is a good first step, as it will allow you the freedom to then rebuild your credit. It’s important to start rebuilding your credit as soon as you can after a major event like a bankruptcy or a consumer proposal to staunch your hemorrhaging credit rating.

If you have credit card debt, we strongly recommend making a move to consolidate this debt. 

Use a Magical Credit loan to pay off your credit cards, erasing these nagging items from your report. Instalment-based payments won’t hurt your credit as much as several near-maxed credit cards, and simplifying your payment schedule makes it easier to stay on top of your responsibilities.

What you want to do is pay off this new line of credit as quickly as possible, within 6 to 12 months. By doing so your credit score will begin to increase. If you’re wondering when you can start rebuilding, some advisers suggest beginning rebuilding credit after the consumer proposal in completely paid off. However, many people start while in a consumer proposal with no problems. Discuss the matter with your financial advisor to determine how to approach rebuilding your financial trustworthiness, and create a plan you can stick to.


Consumer proposals are not the most fun to deal with, but when in debt, it’s better than filing for bankruptcy. By paying off your consumer proposal early you can give yourself a chance to rebuild your credit and get out of debt sooner than expected. Once you’ve accomplished this, paying off a small personal loan can help get you pay on your feet. Take a look at your options for alternative, private and bad credit lenders and choose a lender that you feel will give you what you deserve and who will take the time to fully understand your situation.

Magical Credit is one of the places to start your research on post-consumer proposal loans. Check out our simple loan calculator and FAQ, and if you’re ready, start your application. Our online process will take you no more than five minutes to initiate, and you’ll receive a response within 24 hours.

No one likes hanging around in limbo, especially when your credit situation is precarious; we make the process quick and painless!


Magical Installment Loans: We offer installment loans in the amount of $1,500- $20,000 that have a 12-60 month term with an APR 19.99% min - 46.8% max. On $1,500 borrowed for a 1 year term at 3.9% per month, the total cost of borrowing including a $194 fee is $896.00. The total amount to be paid back with interest and fee is $2,396.00. AB License #349796 and BC License #83626

NOTE: Our installment loans are open, so you can pay off your loan at any time with no penalty. You will only pay interest up to the date you pay it off.

Magical Cash Loans - Ontario, British Columbia, Northwest Territories, Nunavut, and Yukon Residents only: We offer Magical Cash Loans in the amount of $100-$1,500.00. The cost of borrowing is $15.00 per $100.00 for each $100.00 borrowed. On a $1,000.00 loan for 14 days, the cost of borrowing is $150.00. The total to payback is $1,150.00 which is an annual percentage rate of 391.07%. ON License #4741412. BC License#85919.

The Loan must be paid in full by the end of term, no extensions or exceptions, no automatic renewals. Failure to pay your debt on time will impact your future credit with Magical Credit Inc. and other credit lenders. All delinquencies will be reported to the Credit Bureaus.

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