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Auto financing after a consumer proposal is still possible, even while your credit report shows the agreement. Many people choose a proposal to avoid bankruptcy and keep their assets. Here is how it affects your credit, what lenders look at, and how to prepare your application with Financementauto.com in Saint-Jérôme or Sainte-Agathe-des-Monts.
According to the Office of the Superintendent of Bankruptcy Canada (OSB), a consumer proposal is a formal, legally binding process. You offer to repay your creditors part of what you owe, to take more time to pay, or both. A Licensed Insolvency Trustee (LIT) administers it, and the payments cannot extend beyond five years. It is meant for people whose debts do not exceed $250,000, not counting the mortgage on their principal residence.
The big difference with bankruptcy is what happens to your property. In a bankruptcy, the trustee takes possession of your assets, except those the law protects. With an accepted proposal, on the other hand, you keep your assets, including your car, as long as you follow the terms. If a bankruptcy is what appears on your file, read our article on auto financing after bankruptcy.
Your current car loan is a debt secured by the vehicle. The OSB explains that you keep your assets, provided you keep paying your secured creditors. In other words, if your car payments stay up to date, you can keep your vehicle.
Buying another vehicle during the proposal calls for more caution. Before signing a contract, talk to your LIT, who knows the terms of your agreement. Some lenders are willing to review a file while the proposal is still active. In that case, they mostly look at the payments made since the proposal began.
As soon as you file the proposal, the credit reporting agencies learn about it. The accounts included then show a proposal notation. According to the Financial Consumer Agency of Canada (FCAC), Equifax and TransUnion remove the proposal on the earlier of two dates. That is 3 years after you pay off all the debts included, or 6 years after you sign the proposal.
In practice, a proposal paid off sooner disappears from your report sooner. During those years, lenders can see it, but it does not close the door to financing. Mostly, it changes the terms lenders offer you.
The OSB is clear on this point: no one is required to give you credit after a proposal. Your best asset, then, is showing that you can repay a loan comfortably.
The OSB recommends sending a copy of the certificate to the major credit reporting agencies so your record gets updated. Also keep all your proposal documents. Future lenders may ask to see them.
According to the FCAC, payment history is the most important part of your credit score. Every on-time payment counts, whether on a car loan or a credit card. The FCAC also presents the secured credit card as one way to rebuild your credit. You provide a security deposit, and the limit is normally equal to or higher than that deposit.
Next, group your applications when you shop for your loan. Each credit application leaves a mark on your report. However, the FCAC notes that car loan quotes from different lenders within a 2-week period count as a single inquiry. To learn more, read its tips on improving your credit score.
At Financementauto.com, a real person reviews your current situation and explains your options, without judgment. We offer pre-owned vehicles of all makes, inspected before sale, at 155 Lachapelle Boulevard in Saint-Jérôme and 301 Léonard Street in Sainte-Agathe-des-Monts.
To get started, fill out the online specialized financing application: it takes a few minutes and there is no obligation. You can also browse our pre-owned inventory. And if you have never had credit, our article on auto financing with no credit history will guide you.
Not always. Some lenders will review a file while the proposal is still active. Talk to your LIT first, then have your situation assessed.
There is no single waiting period: each lender sets its own criteria. That said, on-time payments since the proposal help your application.
Often, yes. According to the FCAC, Equifax and TransUnion remove a proposal 3 years after you pay it off, or 6 years after signing. By comparison, a first bankruptcy usually stays 6 years after discharge, and 7 years with TransUnion in Quebec.
