Consumer Proposal Interest Rates: Expert Guide to Debt Solutions | CDR

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Tyler McAllister

Senior Finance Writer

Last Updated July 12, 2025

Quick Summary: A consumer proposal offers immediate relief from mounting debt by completely stopping interest charges and typically reducing principal debt by 50-80%. This powerful debt solution, protected under the Bankruptcy and Insolvency Act of Canada, provides a structured path to becoming debt-free through fixed monthly payments over up to 60 months.

The Impact of Interest Rates on Consumer Debt

In today’s economic climate, many Canadians find themselves trapped in a cycle of high-interest debt. Credit card interest rates typically range from 19.99% to 29.99%, while some store credit cards charge even higher rates. Personal loans and lines of credit might offer lower rates, but they can still be substantial, especially with recent Bank of Canada rate increases.

Consider this: If you have $30,000 in credit card debt at 19.99% interest, you’re paying approximately $6,000 per year in interest charges alone. That’s $500 monthly just to maintain your debt balance, without reducing the principal amount at all.

How Consumer Proposals Affect Interest Rates

One of the most significant benefits of filing a consumer proposal is that interest charges stop immediately upon filing. Our team of professionals has helped thousands of Canadians take advantage of this powerful feature. Here’s what happens when you file a consumer proposal:

1. Immediate Interest Freeze

The moment your consumer proposal is filed, all interest charges legally stop. This protection is guaranteed under the Bankruptcy and Insolvency Act of Canada.

2. Principal Reduction

Beyond stopping interest, a consumer proposal typically reduces your principal debt by 50-80%. This means you could potentially reduce a $50,000 debt to $15,000-$25,000, with no additional interest charges.

3. Fixed Monthly Payments

Your reduced debt amount is spread over up to 60 months in equal, interest-free payments. This provides predictability and peace of mind in your financial planning.

The Financial Impact: A Real-World Example

Let’s examine a typical scenario we see at Canadian Debt Relief:

Sarah has $45,000 in unsecured debts:

  • Credit card debt: $30,000 at 19.99%
  • Personal loan: $10,000 at 12.99%
  • Tax debt: $5,000 at 5%

Before the consumer proposal, Sarah was paying approximately:

  • Credit card: $600/month in interest
  • Personal loan: $108/month in interest
  • Tax debt: $21/month in interest
  • Total monthly interest: $729

Through a consumer proposal, Sarah’s debt was reduced to $22,500 (50% of original debt), with zero interest, paid over 60 months. Her new monthly payment: $375, saving her $354 monthly in interest alone.

Comparing Consumer Proposals with Other Debt Solutions

Debt Management Programs

  • Interest rates are typically reduced but not eliminated
  • Full principal amount must be repaid
  • Not legally binding on creditors
  • Usually completed in 3-5 years

Consumer Proposals

  • Interest completely stopped
  • Principal amount reduced
  • Legally binding once accepted
  • Protection from creditors
  • Up to 5 years to repay

Bankruptcy

  • Interest stopped
  • Most debts eliminated
  • Affects credit score more severely
  • Usually completed in 9-21 months
  • More impact on assets

Frequently Asked Questions About Consumer Proposal Interest Rates

Q: Can creditors continue charging interest after I file a consumer proposal?

No. Once your consumer proposal is filed, creditors are legally required to stop charging interest on your debts. This protection is immediate and continues throughout the proposal period.

Q: What happens to interest charges if my consumer proposal is rejected?

If creditors reject your proposal (which is rare), you return to your previous situation with creditors. However, our debt relief experts work diligently to ensure proposals are structured appropriately for acceptance. We maintain a success rate of over 98%.

Q: Can I pay my consumer proposal faster to save on interest?

While there’s no interest to save on in a consumer proposal, you can absolutely pay it off faster with no penalty. This helps you become debt-free sooner and start rebuilding your credit earlier.

Q: Do secured debts like mortgages continue charging interest during a consumer proposal?

Yes, secured debts are not included in a consumer proposal and continue as normal. However, eliminating interest on your unsecured debts often makes managing secured debt payments much easier.

Q: How does stopping interest in a consumer proposal affect my credit score?

A consumer proposal will be noted on your credit report for 3 years after completion. However, many clients find this preferable to continuing with high-interest debt that may lead to missed payments or bankruptcy.

Professional Support for Your Financial Journey

As debt relief experts, we understand that every financial situation is unique. The decision to file a consumer proposal should be made after careful consideration of your specific circumstances. Our team of professionals at Canadian Debt Relief is here to provide you with a free, confidential consultation to explore your options.

The combination of stopping interest charges and reducing principal debt makes consumer proposals an powerful solution for many Canadians struggling with debt. While it’s not the right solution for everyone, the ability to eliminate interest charges while protecting your assets makes it worth considering if you’re struggling with unsecured debt.

Take the First Step Toward Financial Freedom

Don’t let mounting interest charges continue to erode your financial well-being. Contact our debt relief experts today for a free consultation. We’ll help you understand how a consumer proposal could stop interest charges on your debts and create a manageable path to becoming debt-free.

Remember, the sooner you act, the more options you’ll have available. Our team of professionals is ready to help you understand your rights and explore solutions that best fit your situation. With our expertise and support, you can make an informed decision about your financial future and take control of your debt once and for all.

Experience the Benefits of Professional Debt Relief