Many Canadians rely on consumer credit counselling services to help manage debt. When credit card debts feel like a challenge you can get a free evaluation to see if this is an option for you.
A credit counsellor, someone who specializes in debt relief, will assess your options. When your financial state is in a place where you can pay back everything, but you need a little help managing it all, you may benefit from specialized plans.
A debt management program will structure your debt in the best possible way to pay it off quickly.
Step 1: Get Your Free No-Strings-Attached Budget Evaluation
There is no cost for getting a debt and budget evaluation from a consumer credit counsellor. This is like getting a doctor checkup for your financial health, mapping out what you make versus what you owe.
A trained credit counsellor evaluates any debt, your income sources, lifestyle, and budget. They figure out your current status and can confirm the debt solution that makes the most sense for your financial reality.
You can expect your free counselling session to take about 30 minutes and the meeting to happen over the phone. Your consultation will give you with the knowledge required to understand the different debt solutions that you can use to free yourself from debt. These include:
- Plans for Debt Management
- Loan Consolidation
- Consumer Proposals
- Debt settlement options
- Bankruptcy Services
You will be presented with a recommendation from the counsellor that is customized for your financial situation. They’ll walk you through the pros and cons for any debt solutions available and make sure you understand each detail. You’ll be guided towards a path leading to freedom from debt.
Step 2: Join a Debt Management Program
When you need help managing credit card debt and other bills it’s worth considering enrolling in a debt management program. There are many services are designed for people with the financial means to deal with their debt. With a low credit score or a poor debt to income ratio is high-risk, you may not be eligible for options like a debt consolidation loan. There are negative consequences, like credit damage, for solutions like consumer proposals, debt settlement or even the most severe option, bankruptcy.
This is where a debt management programs have their chance to shine. You can think of a debt management program as an alternate form of debt consolidation, where all your bills are compiled into a single payment each month. Your debt total won’t change, but instead of paying the companies directly your repayment is handled by the credit counselling agency.
What is a Debt Management Program?
Given you qualify, a debt management program pairs you with a credit counsellor who will detail a sustainable budget you can afford each month. Here’s how a debt management program works:
- After approval, go over your financial health with your credit counsellor.
- You’ll want to know the totals on each of your credit cards.
- You should list out any unsecured debt, lines of credit or payday loans.
- Any income sources.
- The credit counselling service kicks in as an agent contacts your creditors on your behalf.
- The counselling agency will negotiate with creditors and work out a new arrangement where payments are managed through them.
- They will work to reduce or even eliminate interest rates applied to your debt and stop any more penalties from happening.
- They will create a repayment schedule where you simply need to keep paying your minimums and stop further damage to your credit score.
- After creditors accept the terms, you are officially in the program.
- You make your agreed upon payment, on time, through the credit counselling agency.
It’s worth noting that any cards included in the debt management program will be frozen, the accounts are closed upon completion of payments. You will have 60 months to make all your payments, most people enroll for 36-60 monthly payments.
Your participation in a debt management program is noted on your credit report. This will remain a part of your credit history for 2 years from when you finish paying off your debt through the program.
Should You Choose a Credit Counselling Service?
The quick answer is, “it depends”. Most credit counselling agencies offer a free consultation where they will evaluate all your options and advise the path that makes sense based on your finances.
While you may be in a position where you can handle everything on your own, it can be helpful to talk to a pro before managing debt consolidation. If you opt to take out your own consolidation loan, and don’t take all variables into account, you can end up increasing your debt. This happens when you can’t remake loan payments while budgeting life’s expenses, which leads to more fees, taking you farther away from being debt-free.
Talking to a credit counselling agency will give you another perspective on how to deal with your debt. This is especially true if it turns out your debt to income ratio is in a place where you cannot afford to pay it down. If so, a debt settlement or bankruptcy may be your only choices.
Credit counselling services tend to be not-for-profit agencies. They are unbiased and have the one goal of presenting the best choices based on your life and what you can afford.
Main Benefits of Credit Counselling
There are three reasons to work with a credit counsellor:
Unbiased Debt Assessment
You’ll have the professional advice of a trained specialist. A credit counsellor will be able to take a look at all your income, bills and debt and determine if you can afford to pay down your debt.
A budget is the document that will keep you on course and your credit counsellor will help you create a realistic one. Regardless of the credit counselling services available, we all need a budget to make sense of what we can afford. Think of it as a plan for your money to make sure you avoid debt or become debt-free.
A credit counsellor is a specialist who understands how to create budgets that keep you spending within your means. They will identify opportunities to reduce monthly expenses and avoid little purchases that add up.
The counsellor will be able to help you deem what’s essential in your life and what is a luxury.
Negotiating with Creditors
The main reason to work with a credit counselling agency is they can contact your creditors and negotiate on your behalf. Credit companies tend to be rough with individuals, and the agency knows how to deal with them.
You may be able to contact your creditors and try and lower your interest rates. The main difference is that the credit counselling agency knows what’s attainable and some credit card companies do not want you to get the best deal (some creditors are a pleasure to work with).
Armed with credit counselling services you can rest assured you will reach financial freedom with the fastest route. Your repayment plan will be worked into a budget you can afford. In general creditors are more flexible with credit counselling agencies, getting you an ideal outcome.