Credit Counselling is an Easy 3-Step Process
If you are struggling with debt and feel unable to handle the problem on your own, then non-profit credit counselling may be the solution for you. What is credit counselling and how does it work? Simply put, it involves seeking help from a professional who can offer you expert advice on how to get out of debt and achieve financial wellness. These certified Credit Counsellors will take you through a three-step process that is easy to understand, as well as extremely effective.
Step 1: Financial Assessment
After contacting a certified Credit Counsellor they will want to look over your finances with you. This evaluation is typically free through a non-profit credit counselling agency and involves going over the following factors in detail:
Income: Your net income which is calculated after all deductions
Assets: The value of your home, vehicle(s), RRSP/RESP, or any other investments and properties
Expenses: The amount you spend on necessities like utilities, housing, groceries, and transportation
Debts: Any current credit card and debt balances, interest rates, and minimum payments
There’s no judgement involved in this assessment – your Counsellor wants to understand your finances so that they can get the information they need quickly and efficiently.
Step 2: Finding the Right Solution
Every situation is different which is why it’s helpful to talk to an expert who can provide the right advice that works for you. They may suggest one of the following:
- Taking part in a Debt Consolidation Program where your Counsellor will consolidate your unsecured debt into one lower monthly payment with reduced or stopped interest.
- Applying for a debt consolidation loan through your bank, so you can pay your bank one monthly payment with a fixed interest rate for all your existing debts.
- Creating a monthly budget that actually works for you and allows you to pay your bills on time.
- Filing a consumer proposal through a Licensed Insolvency Trustee (LIT) with affordable monthly payments to pay off your debts over a maximum of 5 years.
- Borrowing from a secured line of credit (or other kind of home equity) to pay off your debts.
- Filing for bankruptcy, which is not the best solution but sometimes the only one.
Step 3: Money Management Skills
A number of people aren’t taught how to manage their money properly, and debt is just a symptom of that problem. Your Credit Counsellor is interested in teaching you essential money management skills that will ensure that you don’t fall into financial troubles all over again. They provide essential advice on how to:
- Create and stick to a monthly budget.
- Build up your savings and create an emergency safety net.
- How to properly and safely use a credit card.
- Set financial goals and stick to them.
Support When You Need It
A Credit Counsellor is more than just a financial advisor – they’re also a friend who will listen to your problems and provide support and encouragement when you need it most. Even when you are at your lowest and losing hope of ever seeing financial wellness, your Counsellor will be there to pick you up and keep you focused on the end goal.