Credit Counselling in Canada

Credit counselling can play an important part in gaining debt relief, providing professional help to find a solution to your overwhelming debt. Not-for-profit credit counselling agencies can help with smaller debts through debt management plans that combine separate debts and attempt to lower your interest rate.

For more unmanageable debt and credit counselling that covers formal debt relief methods including consumer proposals that can reduce debts by up to 80%, an experienced Licensed Insolvency Trustee is better placed to help instead.

What is credit counselling?

In Canada, credit counselling is an activity intended to help you find debt relief. It is a specialist service for meeting to discuss your personal financial circumstances, and explaining the various forms of debt relief available to you. It is an excellent first step to take when you have overwhelming debts and are unsure of what to do next. By working with an experienced debt advice professional, they can help to guide you in the right direction to gaining debt relief, whether that involves taking out a debt consolidation loan or filing a consumer proposal. Both credit counselling agencies and Licensed Insolvency Trustees offer credit counselling services, although credit counselling agencies are often more limited in the advice they can offer.

Do I need a Licensed Insolvency Trustee for credit counselling?

By law, only Licensed Insolvency Trustees are able to explain all the forms of credit counselling service including debt consolidation, debt repayment, and debt settlement. This is because debt relief can include filing consumer proposals and bankruptcy, which only trustees are able to administer legally. You can receive credit counselling from a not-for-profit agency, but they are not obligated to explain all of your available debt relief options. Effective credit counselling means matching the right form of debt relief with your unique financial circumstances, and you should never feel pressured into a debt relief pathway.

What could be the outcome of credit counselling?

Forms of debt relief you may encounter when receiving credit counselling include:

Debt management plans

Debt management plans are often suggested by not-for-profit credit counselling agencies as a form of debt consolidation. By taking on a debt management plan, your credit counsellor may be able to negotiate a reduction in your interest rate. You will still be expected to pay back all of your debt, but it can be a helpful way of combining your debts into a single monthly payment at a reduced interest rate.

Debt consolidation loans

Debt consolidation loans are new loans that you can take out to condense multiple separate loans into one single monthly payment. By taking out a debt consolidation loan, you can often reduce your interest rate, and potentially even gain interest relief depending on your credit report. Often you can spread out your debt consolidation payments over a longer period of time, meaning your payments may become more affordable.

Consumer proposal

If you are struggling with more significant debts than can perhaps be solved with a debt management plan or a debt consolidation loan, filing a consumer proposal could be a suitable debt relief route for you. It is important to note that the only professionals legally certified to file consumer proposals are Licensed Insolvency Trustees, so a credit counselling agency cannot help. A consumer proposal is essentially a formal negotiation with creditors by your trustee, and can result in a reduction of debt by up to 80%, while enabling you to keep your assets.

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How do I find a credit counsellor?

In Canada, it is extremely important to ensure a credit counsellor is either a Licensed Insolvency Trustee, or a member of a not-for-profit credit counselling agency. They should be able to work with you through your financial situation and provide an unbiased view as to how to help you gain debt relief. Credit counselling agencies, however, are typically registered as debt collectors under the Canadian Collection and Debt Settlement Services Act to regain the debt owed to creditors. In Ontario, you can cross-check a credit counsellor as a collection agent by searching debt collectors. It is important to maintain some scepticism as some credit counselling agencies are accredited by self-regulated programs. For a more comprehensive view of your debt relief options, speak to an experienced Licensed Insolvency Trustee as they are regulated by the Canadian government.

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A sensible step to gaining debt relief is to speak to a Licensed Insolvency Trustee for credit counselling. At Spergel, our experienced trustees can help if you are struggling to repay your debts in full by exploring debt reduction options like filing a consumer proposal. Book a free consultation today – you owe it to yourself.