What’s Debt Counselling and how does it Work?

debt counselling

Do you feel stretched to the max by your current debts? Is a monthly barrage of bills and accumulating debt balances make it challenging for you to get out of debt? There is a reason it’s known as “drowning in debt.” The moment you start feeling like you will never pay off your mountain of credit card balances or loans, it can be difficult to see a way out. Fortunately, debt counselling can help turn your financial situation around.

If your debts are keeping you awake at night, consider calling an experienced debt counsellor. He or she can help evaluate your current secured debts and unsecured debts, provide actionable insights to manage those debts, and help you create an action plan to pay off your debts.

What do debt counsellors do?

The purpose of a debt counselling service is to help you resolve your debts. Professional counsellors can be a very useful source of information and advice if you are having a financial crisis. These services can also offer support, guidance, information, and assistance in resolving your financial difficulties.

This may include giving advice on how to deal more effectively with the causes and effects of your debt situation or helping you set up budgeting systems that will make it easier for you to control your spending and repayments. If you are struggling financially, you may benefit from regular contact – either face-to-face, by telephone, or online via email or chat software with debt counsellors.  

Some of the common money issues debt advisors encounter include accumulating balances on credit cards, difficulties in making monthly payments for unsecured debt such as personal loans & student loan debt, and addressing calls from collection agents from debt collection agencies.

How does debt counselling work?

debt counselling

Debt counselling is a form of debt relief program intended to help over-indebted consumers to understand their debts, create a viable debt repayment plan, and eventually pay off their outstanding debts.

You’re generally considered over-indebted if you are unable or struggling to pay your debts on time.

An experienced debt counsellor or credit counsellor will evaluate your current financial situation and debt management strategy. This can be achieved by performing a comprehensive financial assessment that involves determining your current credit card debt, personal loan, student loan debt, and other forms of unsecured debt as well as secured debt level. The financial advisor will also evaluate your current income and surplus income (if any). This will help evaluate your debt settlement option or debt payment plan depending on your current situation.

Once the credit counselling service provider has ascertained that you’re over-indebted, the expert will work with you to figure out a debt management plan that can help you get out of debt.

Finding a reliable debt counsellor

In Canada, both for-profit organizations and not-for-profit organizations provide debt counselling or credit counselling services. It’s up to you to do research and find a trustworthy Canadian organization whose financial counsellors and credit advisors have outstanding money management skills and can guide you through the entire process of getting out of debt. After all, the primary goal of working with credit consultants is to control debt and achieve financial freedom. Here are tips for finding trustworthy Canadian debt counselling agencies.

Pay attention to the organization’s reputation

Ensure the agency or debt counsellor is in good standing with a national or provincial association. Such associations often require their members to maintain specified standards of practice. That means you can find credit counselling agencies through associations such as;

  • Credit Counselling Canada
  • Canadian Association of Independent Credit Counselling Agencies
  • Canadian Association of Credit Counselling Services
  • Ontario Association of Credit Counselling Services

 During your research, find out if there are unresolved or serious complaints about the debt counsellor or agency. These complaints may include false advertising, late debt payments to creditors, and more. You can check for such complaints about an agency with BBB (Better Business Bureau).

Check the agency’s advertising approach

You must be cautious when looking for a debt counsellor to help you implement a debt settlement plan and stop collection calls from creditors. If anything sounds too good to be true, then it probably is. Some profit credit counselling agencies may misrepresent or claim that they can help you gain your financial freedom by resolving your debt payments issues quickly for just a fraction of your debt. Others claim that they can quickly fix credit score, while others misrepresent as being part of a government program.

Remember, you will still pay fees to your debt counsellor even when your creditors are unwilling to negotiate a debt settlement or debt payment plan. Also, it is impossible to erase or change information that is already part of your credit score (credit report) unless the information is incorrect.

Generally, improving your credit score takes time (because you can’t edit your credit report). You must demonstrate to your creditors that your overall debt management habits have improved and you are paying your debts on time. This will be reflected in your credit score and overall credit report.

Be wary of any debt counsellor that tries to coerce you into using their debt consolidation, debt relief, credit report repair, and other related services. If they claim to be part of a government program, contact the specific government agency or department responsible for the program and find out if the debt counsellor is genuine.

Final thought

Many Canadian households are facing significant financial challenges, and one way of addressing those difficulties is through debt counselling. It is a popular choice for people struggling with debt or getting collection calls from creditors. Before you start working with any debt counsellor, please find out the specific services they provide, the cost of those services, and their qualifications.

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