A consumer proposal lets you settle your unsecured debts for pennies on the dollar. Emotionally and financially it’s a great relief to shed the debt® and move on. But while you are paying off the proposal, you are likely living on a strict budget and dedicating a fixed portion of your income to paying off the debt. This may leave you feeling left out when you see your co-workers going out to lunch, or you have to turn down invitations from friends to go to the game on the weekend.
Applying for credit might seem like an easy and viable way to boost your cash flow.
The shed the debt® professionals at Goldhar & Associates caution against taking on new credit too soon.
While you are paying off a consumer proposal, obtaining any type of credit is going to be a challenge, since the proposal is reflected on your credit rating. If you do qualify for a credit card, it is likely to come with a high interest rate. It may also require a secured deposit up front.
So… when should I apply for credit again?
It makes sense to wait until your proposal is fulfilled before you apply to take on fresh credit obligations. This hiatus will help you better understand what your cash flow can manage without credit.
Once your proposal is fulfilled, applying for a secured credit card actually helps rebuild your credit rating, provided you meet all monthly payments as and when required. Secured credit cards also come with a strict spending limit, which safeguards against over-spending.
Your Goldhar & Associates shed the debt® counsellor will advise you on the types of credit that make the most sense based on your particular circumstances.
Credit after a proposal: money management is key.
When you have successfully secured credit following the completion of a proposal, it is important to establish healthy money management practices to keep your budget balanced.
Goldhar & Associates suggests you follow these rules of smart money management:
- Have a written budget and ensure that you are always spending within your means. As part of your budget, you should be putting away a portion of your income into savings and building an emergency fund. Something like a major car repair is not likely to be included in your monthly budget, so building a solid emergency fund will help you over the speed bumps of life’s little crises without incurring fresh debt.
- Never charge more to your credit card than you can afford to pay off in full that month. Minimum payments are not best practices, and accumulated interest charges will cost you more than the sticker price of the purchase. Credit cards should be used because they are more convenient than carrying cash or having to go to the bank – not to borrow money that you will have to repay.
- Just because you CAN buy something does not mean you SHOULD. Suppose during your next shopping excursion you come across the latest electronic gadget that you really want. If it costs $300 and you happen to have that much, ask yourself if you would rather have the item or the money in your bank account. Do not just buy on impulse. Remember, you want to avoid sliding down the slippery slope that led to the consumer proposal in the first place.
For more information about how a consumer proposal can help you shed the debt® , contact Goldhar & Associates for a free, no-obligation consultation. Call 1-855-541-5114 or fill out this easy-to-use web form: http://www.shedthedebt.ca/contact