Ask the Expert: Is credit counselling a good idea?

Dear Jeff:

I’m in way over my head with debt and despite my best efforts, I can’t catch up on my payments. I feel like my debt problem is only going to continue to get worse. I am thinking about getting help from a credit counsellor. Are credit counselling services a good idea?

Signed,

Stuart M

Brantford, ON

Dear Stuart:

When your debt has gotten out of hand, turning to a credit counsellor for support and guidance is a very good idea. Trained credit counsellors are financial professionals who are well-versed in debt relief options and can help you to develop a strategy to pay down your debt and stay debt-free in the future.

If you are thinking about credit counselling, make sure that you do some research before you sign on with a credit counselling agency. Ensure that the agency that you plan to deal with is licensed and reputable. Consider it a red flag if the credit counselling agency doesn’t have a physical address or if they ask you for upfront fees. An initial credit counselling session should be free.

Unfortunately, there are agencies out there that don’t have your best interests at heart and you can wind up paying substantial fees or worse.  Do research online, contact your local BBB and look for consumer reviews. Don’t be afraid to ask lots of questions.

Is credit counselling a good idea for your particular debt problem? If you are looking to pay down your unsecured debt and have been turned down for traditional consolidation loans from your financial institution either because of bad credit or insufficient income, credit counselling is a good option. Most people that enter into credit counselling have the ability and the desire to pay down their debt in full but need some help restructuring their debt or having a longer period to do so.

Credit counsellors assess your debt situation without judgement and offer solutions to your problem. They listen to your financial goals and offer assistance and resources that can help you to achieve them, like learning about budgeting.

Typically, after participation in credit counselling, you end up participating in a debt management program (DMP). In a DMP, your credit counsellor contacts your creditors on your behalf and negotiates to have your interest rates lowered and late fees reduced/removed. They will help you to set up a repayment plan that is affordable. You make a single payment every month to your credit counselling agency and they disburse it to your creditors on your behalf.

One drawback of credit counselling is that you’ll have a note on your credit report. However, most people that participate in credit counselling are having trouble with credit already. Paying your debt down is a step forward to rebuilding your credit again.

The ongoing, personal support that you receive in credit counselling can help you to stay on track to reach your financial goals. It also helps to alleviate your debt stress.

Don’t be shy to give us a call and find out how credit counselling might just be the answer to your debt problem.

 

 

 

 

 

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