Debt consolidation combines your debts into one new loan or payment, and you repay the full amount, usually at a lower interest rate. A consumer proposal is a legally binding agreement, filed by a Licensed Insolvency Trustee, to repay a portion of what you owe over a term that cannot exceed five years. The quick test: if you still qualify for credit and can manage one payment, consolidation may fit. If you cannot realistically repay the full balance, a consumer proposal may be worth understanding.
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A consumer proposal is administered by a Licensed Insolvency Trustee under the federal Bankruptcy and Insolvency Act. Only a Licensed Insolvency Trustee can file one. DACL assesses your situation and explains your options. We do not file proposals and we do not lend money. Because we provide neither product, this comparison is neutral.
| Feature | Debt consolidation | Consumer proposal |
|---|---|---|
| How it works | One new loan pays off several debts | Legally binding agreement to repay a portion |
| Who administers it | A lender | A Licensed Insolvency Trustee, under the BIA |
| Effect on total owed | You repay the full amount borrowed | You may repay only a portion of what you owe |
| Typical interest | Often lower than your current debts | Interest generally stops under the proposal |
| Legal protection | None | Stay of proceedings once the proposal is filed |
| Credit-report impact | Depends on how you manage the new loan | Reported as a consumer proposal (commonly R7) |
| Eligibility signal | Depends on your credit and income | For debts you cannot realistically repay in full |
| Maximum term | Set by your loan agreement | Cannot exceed five years (60 months) (Source: OSB) |
| DACL's role | Assess and refer; not a lender | Assess and refer; not a Licensed Insolvency Trustee |
Every figure above reflects current Canadian rules. The proposal term is capped at five years under the Bankruptcy and Insolvency Act.
DACL is a debt assessment and referral service. We review your situation, explain how consolidation and a consumer proposal compare, and refer you to the right professional. We are not a lender, we are not a credit counsellor, and we are not a Licensed Insolvency Trustee. Where consolidation fits, we point you toward it. Where a proposal fits, we connect you with a trustee.
We've been helping Canadians since 2009. Here is what people ask most:
Consolidation combines debts into one new loan and you repay the full amount. A consumer proposal is a legally binding agreement, filed by a Licensed Insolvency Trustee, to repay a portion over up to five years.
No. Bankruptcy is a separate option. A proposal lets you avoid bankruptcy by repaying part of what you owe under a formal agreement.
Sometimes, depending on your credit and income. A free assessment can show whether consolidation is realistic or whether another option fits better.
Both affect your credit, in different ways. A proposal is noted on your credit report; consolidation depends on how you manage the new loan. We can walk you through the specifics.
No. Only a Licensed Insolvency Trustee can file one. DACL assesses your situation, explains your options, and refers you to the right professional.
A short, free, confidential assessment is the simplest way to understand which path fits your situation. There is no cost and no pressure. You can also read the consumer proposal vs bankruptcy comparison or explore all debt-relief options.
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By Ishank · Debt Education & Content · Debt Advisors Canada
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General information, not legal, financial, or professional advice. Confirm your situation with a licensed professional. Debt Advisors Canada is not a Licensed Insolvency Trustee, a lender, or a government program.