How Does Debt Counselling Work in Canada?

Navigating through financial troubles can be a daunting task, and that’s where the value of debt counselling comes into play. This article takes a deep dive into understanding how does debt counselling work in Canada. It outlines the process, benefits, and what to expect when seeking assistance from a debt counselling agency.

Introduction to Debt Counselling in Canada

Debt counselling services in Canada primarily aim to provide assistance to individuals struggling with credit card debt or other financial issues. These services offer a variety of solutions tailored to an individual’s unique financial situation. The primary objective is to help individuals understand their financial status and guide them towards the best possible debt solutions.

Step 1: Getting a Debt and Budget Evaluation

The first step in debt counselling is a free debt and budget evaluation. Non-profit debt counselling services in Canada offer this service free of charge. A trained debt counsellor reviews your financial status, including debts, credit, and budget, to help you understand your current situation and the possible debt relief options available to you.

These counselling sessions usually conducted over the phone, offer a comprehensive understanding of the range of solutions that can be used to eliminate debt. At the end of the session, the counsellor will recommend a solution best suited to your financial situation, offering peace of mind that you’re choosing the right path.

Step 2: Enrolling in a Debt Management Program

A debt management program is an effective debt solution for people who can afford to repay their debts but require assistance. This program is an ideal choice for individuals who have a low credit score, too much debt, and want to avoid severe credit damage caused by other debt relief solutions.

Understanding Debt Management Programs

Debt management programs work in a specific way:

  1. The credit counsellor assists in setting up a budget and determining a monthly payment that you can afford. 1. The plan typically includes all credit cards. 2. Other types of unsecured debt, such as unsecured personal loans, Lines of Credit (LOCs) and some payday loans, may also be included.
  2. The credit counselling team then contacts your creditors.
  3. Creditors agree to accept payments through the credit counselling agency, reduce or eliminate interest rates on your debts, and halt future penalties.
  4. Once all creditors agree to the plan, your program officially starts.
  5. Each month, a single payment is made to the credit counselling agency, which then distributes it to your creditors.

All cards included in the program are frozen upon enrollment and are typically closed when the program is completed. Most plans take on average between 36-60 payments.

Assessing the Need for Credit Counselling

The free credit counselling session can be beneficial regardless of the debt solution you choose. Even individuals with good credit can benefit from a second opinion to ensure they are making the right financial choices.

A credit counsellor can also assist in determining whether you can repay everything you owe realistically. If not, you may need to contact a debt settlement company or a Licensed Insolvency Trustee to discuss other options.

Benefits of Credit Counselling

There are three primary services that a trained credit counsellor provides:

Debt Consultation

Navigating through debt problems can be overwhelming. A credit counsellor can provide an unbiased perspective on your situation, offering a supportive environment to discuss your financial struggles and answer your questions.

Budgeting Assistance

Developing a balanced budget is crucial in achieving a debt-free life. A credit counsellor can help assess your spending habits, identify areas of unnecessary expenditure, and suggest ways to reduce bills and other necessary expenses.

Liaising with Creditors

A significant advantage of working with a credit counselling agency is their ability to negotiate with your creditors on your behalf. Credit card companies are often more willing to reduce or eliminate interest charges when working with a debt counselling agency.

The Role of Financial Counselling Agencies

In Canada, there are numerous accredited, non-profit credit counselling organizations that offer services over the phone or in person. These organizations employ professional credit counsellors who provide expertise and insights into various money situations.

After understanding your financial situation, the counsellor can assist in creating a personal or household budget, aligning it with your priorities. They can also explain realistic debt relief options, including programs that consolidate credit card and unsecured debt payments into one affordable monthly payment.

Importance of Thorough Financial Assessment

Just like a plumber or an accountant, a credit counsellor’s expertise can save you valuable time and money. A thorough financial assessment is essential to provide accurate guidance based on your individual circumstances.

Appointment Options

Most credit counsellors are available to help either in person or over the phone – whichever is most comfortable or convenient for you. Video or web-based appointments might not be feasible for remote or isolated communities with slow internet connections.

Finding a Good Financial Counsellor

In Canada, there are several non-profit credit counselling offices known for their outstanding service. These organizations have professionally trained and accredited credit counsellors who can provide guidance and real solutions based on your individual circumstances.

When it feels like you’re on a lonely road with only debt by your side, reaching out to a credit counselling organization in your area can be a significant first step towards financial freedom.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.