The Complete Guide to Consumer Proposal Loans for Auto Dealerships
April 17, 2023
If you have an auto dealership and want to know what you should do to improve your business, consider a consumer proposal loan. A loan for a consumer proposal in Canada can do more than you might expect. It is a common alternative to bankruptcy.
Did you know that there are 1.4 billion vehicles worldwide? Auto dealerships will always have a spot in the market since people are always in the market for vehicles. The problem is that auto dealerships can easily run into problems if they don’t know how to keep their business afloat.
But what kind of loan is this, and how does it work?
It is not like the many car loans Canada has to offer. It is instead a unique way to get out of debt. Keep reading and learn more about how consumer proposals work and how they can be beneficial.
What You Need to Know About Consumer Proposals
Suppose you are in a lot of debt. You might be in so much debt that you have creditors on all sides of you trying to get what you owe. But you might not have all the money to repay them.
Many people think that bankruptcy is the only answer in this situation. But it isn’t. Bankruptcy has a lot of downsides that may not make it worth it.
But a consumer proposal may be the perfect alternative. There are many benefits of consumer proposals that most people don’t know about. While it is similar to filing for bankruptcy, there are some important differences you need to consider.
A consumer proposal is a legally binding agreement. It is an agreement that states that you must pay what you owe to your creditors within a fixed period. The amount that you have to pay is less than what you owe.
This makes it easier to handle your debt. Most people have to pay off this debt within five years. This is enough time for most people to get enough money together to honor the legal agreement.
But why would creditors agree to receive less money than what they’re owed? They know that people in debt often don’t have the means to repay them in full. They may have to wait forever for the chance of being paid back.
How Consumer Proposals Work
Many creditors would prefer to receive assured, regular payments, even if they are less than what you owe them. You would have to pay your creditors monthly. The good news is that the amount you pay won’t increase.
If your income increases, the amount you pay will remain the same. But before you proceed, you’ll need a licensed bankruptcy and insolvency trustee. This is because a consumer proposal is a legally binding agreement.
This option is also maintained by the Bankruptcy and Insolvency Act of Canada. There are not many consumer proposal qualifications you have to satisfy.
You will have to face some upfront fees if you decide to get a consumer proposal. Filing for this proposal will cost $750.
If your creditors accept this proposition, you’ll pay another $750. You may also have to give a small percentage to the trustee helping you. The good news is that you don’t have to relinquish your assets when you file a consumer proposal.
This is unlike filing for bankruptcy, which does require you to give up some of your assets. Your creditors will also no longer be able to garnish your wages or threaten you with going to court over what you owe.
This can be a big stress reliever. The downside is that filing for a consumer proposal will give your credit score a big hit. It may take several years for it to recover.
You have to be careful once you start making payments with the consumer proposal. If you miss a few payments, this will not be accepted. You may have to file for bankruptcy to solve the problem.
So, make sure you have enough money for the monthly payments before you proceed.
What About Consumer Proposal Loans?
Suppose customers with consumer proposal loans come to your auto dealership. It is possible for a person to buy a vehicle with this loan, though they are meant to use it to pay off the consumer proposal. But some people may not need this loan as much as others.
They may only need a small fraction of the loan to pay off the consumer proposal. They can use the rest of the loan for whatever they want. It is perfectly legal to buy a vehicle with a consumer proposal loan.
There is no need to be wary of this type of customer coming to your auto dealership. You just have to make sure that they can make all the necessary payments. You can look into the customer’s financial history and determine if you like what you see.
Some auto dealerships will turn away those with consumer proposal loans because they don’t trust them. But this isn’t necessary. If all the important payments are made on time, there should be nothing to worry about.
How Does a Consumer Proposal Loan Work?
A consumer proposal loan is an alternative to bankruptcy. It involves paying off a reduced amount of what a person owes over five years. It is a very straightforward way to get out of debt.
These loans can also be used to buy vehicles and other things. To learn more about how it works, check out our services.