What is the difference between debt consolidation and consumer proposal?

If you’re struggling to make ends meet, you may have 2 options to regain control of your finances and avoid bankruptcy. Both debt consolidation and consumer proposals allow you to repay your debts, but under different conditions.

See which one and understand the difference!


Understanding the difference: what you need to know.

If you are having difficulty choosing which option is best for you and are wondering what are the differences, here are the answers from our experts.

What is a debt consolidation?

Debt consolidation is a loan granted to you by your financial institution to repay all or part of the debts you want to include in your consolidation.

It simplifies the management of your payments by grouping them into a single payment with a maximum repayment period of 5 years. However, you must meet the bank’s requirements to be eligible for consolidation, namely a good credit record, holding a stable job and having a debt ratio of less than 40%.

It is also important to know that the interest rate usually varies between 12% and 14%, which is higher than a regular loan. Thus, to save interest charges, it is important to consolidate only your debts that have a higher interest rate than your loan. Since you are paying 100% of your debts, there will be no negative impact on your credit report.

If consolidation is not possible, either because your financial institution refuses it or because the monthly payments do not meet your budget, the proposal then becomes an interesting alternative.

What is a consumer proposal?

The proposal is an agreement that a Licensed Insolvency Trustee negotiates on your behalf to repay your unsecured debts according to your financial capacity.

Since all interest on included debts is, by law, reduced to 0% and, in most cases, the offer is less than 100% of the total debts, the monthly payments will usually be much lower than that of a consolidation loan.

Like consolidation, the maximum duration of a proposal is 5 years and you can keep all the assets you want. However, your credit report will be negatively affected during the proposal and for 3 years after.


Navigating through the different options can be very confusing. We can help you see more clearly and to help you achieve a life without debts. In 24 hours, you will have the answers to your questions and a plan that we will put in place with you.

Do not hesitate to contact us toll-free at 1 877-Liberté or to make an appointment online.