If you’ve ever felt exhausted by your increasing debt and are stressing out about how to repay it, you’re not alone. Over 13,000 Canadians filed for bankruptcies and proposals last October, indicating that an increasing number are struggling with personal insolvencies.
However, it’s not all bad news. With debt comes debt alleviation, which the government has taken steps to reduce. Since so many people are struggling with the same problem, there are multiple ways to get help for your outstanding obligations. Debt counselling is one of these solutions.
Financial counselling assistance from licensed professionals is extremely beneficial for those who are unsure how to deal with their debt or don’t know which debt-alleviation program is right for them. Read on to learn about debt counselling, and why it may be invaluable for you in your journey to financial independence.
What is credit counselling?
When your debts surpass the limit you can personally manage, talking to a financial professional will help you get back on track. Debt-counselling services will help you improve your financial situation and record by getting personalized expertise on your debt problems. Not only will this help you get out of any present debt you may have, but debt counselling will also help you navigate future finances more easily through financial education.
At debt counselling you can be given information about differing financial subjects, such as budgeting, strategies for getting out of debt, and even a debt management plan.
What is a debt management plan?
A formal Debt management plan is essentially a consumer proposal. It allows you to make an offer to your unsecured creditors to pay back what you owe by making one consolidated monthly payment through a Licensed Insolvency Trustee. You want a formal plan registered through the government as informal plans are often unenforceable and creditors may choose not to participate.
To solidify your debt management plan, you begin with sharing all your outstanding debt information with your debt counsellor and figure out the terms of your office based on your abilities. In a consumer proposal there is no interest charged. The amount you offer, if accepted, is the amount you will pay. It is important to refer to a debt counselling service that can help you navigate this process and alleviate your debt.
If your unsecured creditors agree to the offer, it will be easier to make the monthly payment, as it is lower and consolidated. After making the payments on time, your debt counselling agency will use the money to pay back your creditors as specified in the repayment negotiation.
Is debt counselling right for me?
Every individual’s financial situation is unique, which is why we recommend getting evaluated to ensure that credit counselling is suited to you. However, a general rule of thumb is that credit counselling may come in handy for people who have simple unsecured debt such as small unpaid credit card balances, personal loans, and other outstanding bills. It is important to note that tax debt, certain student debt, and car loans and mortgages (where you plan to continue) cannot be settled through a proposal.
How much does debt counselling cost?
Our initial appointments are free because we know people are having a hard enough time when they come to see us. Fees for debt counselling vary according to the agency you refer to.
Typically, if you then move forward with a consumer proposal, and once approved by the creditors, you make an agreed upon payment every month to manage your debt based on your debt management plan.
For some situations, a consumer proposal may be a more manageable alternative to other types of consolidation, so be sure to discuss that with your personal counsellor.
Does debt counselling affect my credit score?
A common misconception is that working with a debt counsellor may impact your credit score. In reality, a simple consultation will never bring your rating down. However, entering into a debt management program such as a consumer proposal may lower your credit score, but only for the short term. Your credit report will indicate that for the duration of your repayment plan, you will be making payments to your credit counsellor. Your credit report will mention it for 3 years after you completed the terms. After this, however, your credit score will not reflect any changes and you should be good to go in the long term.
What are some alternatives to credit counselling or a consumer proposal?
Always make decisions about your financial burdens after consulting with a professional. Here is an overview of some alternative options for debt alleviation:
Debt consolidation: Combining all your debt through a financial institution, so you can get a lower rate of interest and a single monthly payment.
Home equity line of credit (HELOC): A secured line of credit against your home at a lower interest than your other debts.
Credit card balance transfer: A no-interest offer on all outstanding balance for a period of 6 to 12 months.
Bankruptcy: An agreement to pay off your debt by giving up many of your assets.
If you’re looking to manage your debt with more ease, you can rest assured that there are many programs, plans, and counsellors available to help you. Deciding on which debt alleviation program to undertake can be difficult, but that’s where debt counselling comes in. Receiving personalized advice and concrete negotiations on your behalf can help you get out of debt quickly and efficiently.
To learn more about debt counselling services, call Kevin Thatcher & Associates at 1-888-702-9801 or contact us here.