What is Credit Counselling? An Extensive Guide
Credit Counselling:
What it is & How it Can Help You Get Out of Debt
In the vast financial landscape, numerous Canadians find themselves under the weighty yoke of consumer debt. With the mean consumer debt exceeding $27,000, it is evident that a significant number of Canadian citizens are grappling with exorbitant interest rates on substantial amounts owed on credit cards, personal loans, and more. The question that arises here is, “What is Credit Counselling?” and how can it help?
Understanding the Gravity of Consumer Debt
The predicament of consumer debt is not to be taken lightly. If individuals make only the minimum required payments, it could take them decades to clear their debts. Some consumers are so deeply immersed in debt that the likelihood of them fully repaying their creditors is slim. If no action is taken, these individuals risk filing for bankruptcy.
If you identify with this situation and fear the looming specter of bankruptcy, it may be time to consider consumer credit counselling services. With the right credit counselling program, you can regain control of your financial situation and sidestep debt solutions that could potentially harm your credit standing, such as consumer proposals or personal bankruptcy.
The Essence of Credit Counselling
Consumer credit counselling is a meticulously designed debt education and reduction process aimed at providing comprehensive financial assistance to those burdened by consumer debt. Typically offered by non-profit organizations, credit counselling is often the path chosen by people who are financially challenged but are still able to meet their bill payments.
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Credit Counselling
Credit Counselling may be a viable option for many consumers, but it is not a one-size-fits-all solution.
The credit counselling process can be quite extensive, depending on your debt amount and your counsellor’s negotiation skills with your creditors. By employing a mix of budgeting and financial education, debt consolidation loans, successful negotiations with your creditors, and other strategies, credit counselling strives not only to liberate you from the clutches of debt but also empower you with the tools to avoid falling back into deep debt.
While engaging in the credit counselling process, you typically receive:
- Consultations with a trained financial counsellor to develop and adhere to a budget.
- Assistance in negotiating with creditors to reduce or reverse late fees that currently contribute to your debt.
- Help in obtaining a debt consolidation loan to lower your average interest rate and your monthly payment amount (if suitable for your situation).
- A debt repayment plan where you make a single payment each month to your credit counselling agency, which then divides and forwards this payment to your creditors.
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Is Credit Counselling the Right Choice?
While credit counselling can be a viable option for many Canadians, it may not be suitable for everyone. Credit counselling can aid individuals whose consumer-debt-to-income ratio is relatively low. However, those with a high ratio and who either qualify for bankruptcy or owe enough to file a consumer proposal might find these debt solutions more beneficial.
A useful guideline is that if it will take longer than seven years to become debt-free with credit counselling, bankruptcy, or a consumer proposal are likely better alternatives.
Those enrolled in consumer counselling will not be able to access affordable credit while they are in the program. If you will be in the program for more than seven years, one of the alternative options might be more suitable as they restrict you from getting affordable credit only for a seven-year period.
If bankruptcy or a consumer proposal is not a feasible option and you prefer not to endure the lengthy credit counselling process, you might want to consider debt settlement. An effective debt settlement program can often liberate you from debt in approximately 12–36 months or less, making its swift results a definite boon.
Lastly, credit counselling is optimal for those who owe $10,000 or less. Since credit counselling agencies do not usually offer principal reduction services, their assistance generally extends to lowering your interest rate and eliminating fees and late charges. If your debt is less than $10,000, the duration it will take to repay your debt with credit counselling and with debt settlement is negligible. However, if you owe more than $10,000, you will likely save more money and become debt-free faster with debt settlement.
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Seeking More Information
Choosing between debt relief options can be challenging, and seeking professional advice is often the best first step. To learn more about your options, fill out the debt relief form.
In essence, What is Credit Counselling? It is a route to financial freedom for many Canadians burdened by consumer debt. By engaging with consumer credit counselling services, individuals can regain control of their financial well-being, avoid the path to bankruptcy, and learn valuable tools to prevent a relapse into deep debt.
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