Benefits of Credit Counselling
Canadian consumers who are struggling to repay their debt might benefit from a credit counselling plan. Credit counselling can help you regain control of your finances. Working with a credit counselor, such as a Licensed Insolvency Trustee, allows you to work with a financial expert who can review your current debt situation and help you make a plan to become debt free and give you the tools to manage your finances successfully in the future.
How Does Consumer Credit Counselling Work?
A credit counselor will help you analyze your financial situation and help you come up with the best plan to pay off your debt.
A good credit counselor will help you make a plan to manage your money, as well as pay off your debt.
Credit counselling starts with a free evaluation meeting with the counselor followed by advice on the next steps to take. In order for credit counselling to work for you, it is important that you commit to the process and following the advice you receive from the counselor.
Credit counselling is often best for people with a lower amount of debt as you will be repaying your entire principal under a credit counselling plan.
Credit counselling helps you determine the right approach for you to tackle your debts and live debt free.
Benefits of credit counselling – The main services of a credit counselling plan includes:
An Evaluation of Your Debts
Before the credit counselor can help you, they must have an understanding of your financial situation.
Therefore, the first step in a credit counselling plan is to meet with a Licensed Insolvency Trustee to discuss your financial situation.
Your credit counselor will help you make a budget that you can live by.
Having a budget helps you manage your money and prevents you from spending more than you earn.
When you are in credit counselling you will learn how to write a budget that you can follow comfortably.
Your budget will allow you to live comfortably so you do not get discouraged. It is important that you stick to your budget.
You will find it much easier than you expected to follow a budget once you know how to write a sensible budget.
Benefits of Credit Counselling – Negotiation with your Creditors
When you enter a credit counselling plan your credit counsellor will contact your creditors on your behalf.
The counsellor will attempt to negotiate a reduction on your interest rates, making it easier and quicker to pay off your debt.
Having a lower interest rate will result in lower monthly payments, which can help you stretch your budget.
Additionally, you could continue making the same monthly payments you were before, but more of your payments will go towards paying your debt principal down and you will get out of debt even faster.
Why Use Credit Counselling Services?
Debt and poor credit can have a serious long-term impact on your life. Money problems can lead to a poor credit score which leads to:
Recovery is possible from these occurrences but it is better to get your debts under control before they get out of hand.
Working with a Licensed Insolvency Trustee to set up a credit counselling plan can help you live a financially successful life.
What are the Benefits of Credit Counselling?
Working with a financial expert will give you a clear and unbiased view of your financial situation. Your debt counselor can help you see your debt situation in a new light and will give you the steps you need to take to get your finances under control.
The advantages of credit counselling include:
- You will get a clear plan to get out of debt and manage your finances successfully;
- Your credit counselor can negotiate a lower interest rate on your debt for you. For some consumer this can result in savings of thousands of dollars;
- You can stop collection calls;
- You will learn how to live on a budget;
- You will get the tools needed to manage your money in a successful manner;
- You will get the advice of a financial expert. A licensed insolvency trustee can help with credit counselling as well as filing bankruptcy or a consumer proposal.
Only a LIT can provide a full range of debt relief vehicles including the benefits of credit counselling.
What are the Disadvantages of Credit Counselling?
Generally, the biggest drawback to a credit counselling plan is that your total debt principal that you owe is not reduced. Additionally, when you enter a credit counselling plan your credit will be impacted; credit counselling in Canada results in an R7 credit rating on your credit report.
Should I Consider Credit or Debt Counselling?
Credit counselling can be beneficial for people who would like to avoid bankruptcy. Generally, a person with little debt is a better candidate for debt counselling as the total amount you owe will not be reduced.
People with a larger amount of debt, or very little income might need to consider filing for bankruptcy. Debtors in this situation who would like to avoid bankruptcy should considering a consumer proposal. Unlike credit counselling, under a consumer proposal plan you can reduce the amount of debt to repay by as much as 70%.
Each consumers debt situation is unique and you should consider all of your options.