If you’re struggling to manage your debts and need to regain control over your finances, credit counselling can provide valuable support. Credit counselling services help individuals develop personalized plans to tackle debt and build better money management habits.
Whether you’re dealing with credit cards, personal loans, or other spiralling debts, seeking professional advice can relieve financial stress. In this guide, we’ll explain how credit counselling works, which debts it can help with, and the ways in which working with a certified counsellor can help you regain financial stability.
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What is credit counselling?
Credit counselling is a form of financial counselling designed to support people facing financial problems by providing expert guidance on debt repayment, budgeting, understanding credit, and other aspects of money management.
If you’re struggling with debt, and feel you could benefit from professional advice, a credit counselling agency can assess your financial situation and offer practical solutions to help you regain control.
A certified credit counsellor will review your income, expenses, and outstanding debts to help you develop a personalized plan. In more serious cases, this may include entering some form of debt management plan to consolidate debt payments into one manageable monthly amount.
Reduce your debt by up to 80%
- Licensed Insolvency Trustees
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- 75 offices across Canada
How does credit counselling work?
Credit counselling is a structured process designed to help individuals regain control of their financial situation and get on top of their debt. Here’s how it works:
1. Seek advice from a Licensed Insolvency Trustee (LIT)
The first step in credit counselling is to consult a professional. A Licensed Insolvency Trustee (LIT) or a certified credit counsellor can assess your financial situation and determine the best course of action.
Many agencies offer free initial consultations, where you can discuss your income, expenses, and outstanding debts.
2. Talk through your debt relief options
Once your financial assessment is complete, your credit counsellor will outline possible debt relief solutions based on the information provided.
What’s best for you might be creating a budgeting plan, negotiating lower interest rates with creditors, or setting up a formal debt solution in more serious cases. The goal is to find an affordable way to repay what you owe while minimizing financial stress.
Debt Solution Finder
3. Choose a debt management program
If your credit counsellor decides your debts are severe enough, they may recommend that you consider entering a formal debt management program like a consumer proposal, which must be set up by a Licensed Insolvency Trustee, like A. Farber.
Formal debt solutions can help you consolidate unsecured debts into one monthly payment. Your credit counsellor can assist you in setting up a formal solution ; they may also negotiate with creditors on your behalf to freeze interest charges or reduce collection calls.
Following this structured repayment plan can help you regain financial stability and work towards a debt-free future.
Which debts can credit counselling help me with?
Credit counselling can assist with various types of consumer debt, which is the name given to the most common unsecured debts. We’ve included some examples below:
1. Credit card debt
High-interest credit card debt can be challenging to regain control of, especially if you find yourself defaulting on payments and being hit with additional charges. Credit counselling can help by consolidating multiple credit card payments into a single, manageable amount and providing you with strategies to curb credit card spending.
2. Personal loans
Unsecured personal loans can be difficult to manage, especially if they come with high interest rates. A credit counsellor can assess your financial situation and help you find a repayment plan to make payments more affordable.
3. Other consumer debt
This includes medical bills, overdue utility payments, and retail credit accounts. While secured debts like mortgages and car loans aren’t covered under most credit counselling programs, many consumer debts can be managed through the financial planning and structured repayment program that a certified credit counsellor can help you with.
Benefits of seeking credit counselling
Whether you’re struggling with credit card debt, personal loans, or just want to expand your financial knowledge, working with a certified credit counsellor offers several key benefits.
1. Improving your financial education (Better money management)
One of the biggest advantages of credit counselling is learning how to manage your finances more effectively. As a trained financial professional, a credit counsellor can help you develop better money management habits, such as creating a budget, tracking expenses, and understanding how interest works.
This financial education empowers you with the knowledge you need to make informed financial decisions and avoid debt problems in the future.
2. Dealing with severe debt problems
If you’re in serious debt and are feeling overwhelmed, a credit counsellor can help you take back control. They’re equipped to negotiate with creditors on your behalf, help you reduce punishing interest rates, and put an end to stressful collection calls from people you owe money to.
After closely reviewing your finances, a credit counsellor might decide you could benefit from a formal debt solution. If that’s the case, they’ll help you set up an appropriate debt management plan, like a consumer proposal, while making sure you meet the eligibility criteria.
3. Laying the foundations for your financial future
The right credit counselling program can help you regain financial stability and build long-term financial well-being.
By addressing current debt issues and learning how to manage money more effectively, you set yourself up for a healthier financial future where you’re more likely to re-establish your credit profile and steer clear of overwhelming debt.
Where do I find credit counselling services in Manitoba?
If you’re struggling with debt and need professional guidance, there are several resources available in Manitoba to help you find reputable credit counsellors.
1. Government website
The Government of Canada provides resources on debt relief, including a directory of registered credit counselling agencies. Checking official government websites ensures you receive legitimate and regulated financial advice. You can also learn about different debt relief options, including consumer proposals and bankruptcy.
2. Credit Counselling Society
The Credit Counselling Society is a non-profit organization offering free financial assessments, budgeting help, and debt management solutions. Their certified credit counsellors can help you explore your options and choose the right solution for your financial situation.
3. Licensed Insolvency Trustee (LIT)
A Licensed Insolvency Trustee is a federally regulated debt professional who can offer you expert financial advice. While a LIT typically handles consumer proposals and bankruptcy, they can also provide general guidance on debt relief and refer you to credit counselling services if it’s a better fit for your financial situation.
Are there other forms of debt help available?
If credit counselling isn’t the right fit for your finances, other debt solutions may provide the relief you need. Here are three common alternatives:
1. Consumer proposals
A consumer proposal is a formal agreement between you and your creditors, typically arranged by a Licensed Insolvency Trustee (LIT). It allows you to reduce your total debt and repay it through one affordable monthly payment over a set period, usually up to five years.
Unlike bankruptcy, a consumer proposal allows you to to keep your assets while offering you protection from creditor actions like collection calls and wage garnishments.
2. Debt consolidation
A debt consolidation loan combines multiple debts into one loan with a single monthly payment. This can simplify your debt repayments and potentially lower your interest rate, making it easier to pay off debt more quickly.
To qualify for debt consolidation, you’ll usually need a stable income and a reasonable credit score, otherwise lenders may impose less favorable repayment terms.
3. Bankruptcy
When other debt solutions aren’t viable, bankruptcy may be a last resort. It legally eliminates most unsecured debts but has long-term consequences for your credit report. A Licensed Insolvency Trustee can guide you through the process and help determine if bankruptcy is the right option.
