Consumer Proposal vs. Consolidation Loan
A consolidation loan is organized through your lending institution. You usually will roll all your unsecured debts, such as credit cards and lines of credit, into one loan with one monthly payment. The interest rate on the loan is usually lower than the rates you pay on your credit cards. You may have to give up most or all of your credit cards in order to obtain the loan from your lender.
A consumer proposal is a legal arrangement organized through a bankruptcy trustee. You work with your trustee to make a plan to pay back only part of your debt to your lenders, who may agree if they think you are unable to pay back everything you owe. The proposal will sit on your credit rating for 2 years. With a loan, you pay back all of your debts, but there is no negative affect to your credit rating.