The most recent MNP Consumer Debt Index revealed that one-third of the 2,000 respondents are struggling to make enough to cover their bills and expenses. If you’re one of the many Canadians having difficulty with debt management, credit counselling can help you.
Credit counselling agencies can help you get a handle on your finances by working with you to create a realistic budget and developing a tailored debt management plan that suits your monthly budget. Credit counsellors can also negotiate with creditors on your behalf to develop manageable payment plans, reduce your interest rates, and set you on the path to credit repair and solvency.
If you’re having a hard time staying on top of your bills and fending off calls from debt collectors, consider pursuing credit counselling to help you get out of debt.
In this guide, we’ll unpack how to choose a credit counselling service with your best interests at heart and what to expect during the counselling process.
Credit Counselling Services
Credit counsellors offer various services to help you regain control of your finances, pay down your debt and avoid bankruptcy. Counselling services are typically tailored to your unique situation and may include things like:
Financial literacy education - A counsellor will help you understand how different financial products work and how to put them to use to improve your financial wellness. They can also help you understand the potential impact or repercussions of carrying debt or declaring bankruptcy on your long-term financial goals.
Assistance with budget planning and management - Credit counsellors will analyze your income and expenses to help you create a budget that fits your financial situation. They can help you identify areas to cut spending to free up more money to put toward debt repayment or savings. Your counsellor can also help develop money management strategies so you feel in control of your finances.
Debt management and repayment planning - Credit counsellors can work with your creditors to secure affordable debt repayment plans, often freeing you of the burden of paying excess interest and fees on what you owe. They will also work with you to ensure the repayment plan fits your budget.
Finding and Choosing a Credit Counselling Service
Choosing a reputable credit counselling agency is paramount to regaining control of your finances. Unfortunately, there are many predatory organizations out there operating under the ruse of providing credit counselling while making bold promises to settle your debts for less than what you owe and repair your credit quickly.
Be wary of claims like these.
A reputable credit counselling organization will take a more measured approach to resolving your debts. They can help put you on track to settle your debts faster and work with your creditors to secure favourable repayment terms, but they can’t repair your credit overnight.
Evaluating Different Credit Counselling Services
Keep the following points in mind before you sign on with a credit counselling agency:
Is there a cost to participating in their credit counselling program? Some agencies may charge a flat fee for credit counselling, while others will collect a commission from what you pay on your debt repayment plan. Ensure you’re aware of any costs associated with the debt consolidation or repayment plan you are considering.
Is the organization for-profit or non-profit? Both models are common, but non-profit organizations typically have your best interests at heart, while for-profit organizations are ultimately trying to make money.
What is their approach and process for credit counselling? Typically credit counselling involves more than simple debt consolidation. A reputable counsellor will work with you to tailor the debt repayment plan to your financial situation. If the counselling program doesn’t involve one-on-one work, ask yourself whether it will be beneficial.
Do they offer a free consultation so you can get a better sense of their services? Most reputable credit counselling firms will provide a complimentary consultation before you enroll in one of their programs. This is an excellent opportunity to get a feel for the counsellor, learn how the program works and how it will benefit you, and ask any questions you may have about the process.
Can the credit counsellor demonstrate any proof of experience or qualification for offering credit counselling services? Credit counsellors in Canada should have completed an Accredited Financial Counsellor Canada designation before beginning to work with clients.
Does the credit counselling organization have a positive reputation? A quick search for reviews of the agency on Google or Reddit should reveal whether or not past customers had positive experiences working with them. You can also look up the agency on the Better Business Bureau of Canada website to see if any complaints have been lodged.
The Credit Counselling Process
A standard credit counselling process will look something like this.
First, you and your counsellor will review your financial information, including income, payment frequency, expenses, and debts. This information helps them understand how much money you have coming in, what you owe each month, and the cadence at which you are paid, which will inform your money management plan.
Credit Report Analysis
Next, your counsellor will go over your credit report with you. They’ll flag any derogatory marks they find and suggest how you can correct these to repair or improve your credit score.
Making a Plan
Finally, your counsellor will use all the information you’ve provided to create a budget and debt repayment plan to help put you back on solid financial footing and improve your credit score.
During this step, your counsellor will work with your creditor to establish a manageable payment plan within the budget you’ve set. Once the creditor agrees to the program, you’ll sign off and begin making monthly payments.
If you’re fielding constant calls from debt collectors, your credit score has been damaged from missed or late payments, and you’re unable to stay on top of payments, credit counselling can be a powerful way to regain control of your finances.
Credit counsellors can help you overhaul your budget, create money management strategies that fit your financial situation, and work with your creditors to create realistic debt repayment plans that will get you back on track.
To make the most of credit counselling, be open with your counsellor about your current financial situation. They are experienced in working with individuals from all kinds of different financial backgrounds. Setting aside any shame or stress you’re carrying around your finances and being upfront with your counsellor will help them make strategic recommendations that will improve your financial wellness long-term.
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