Getting help from a credit counsellor
You may be having trouble paying back your debt or keeping up with your payments. In this case, you may want to talk to a credit counsellor. Simply talking to them won't affect your credit score.
A credit counselling agency can provide a range of services, such as:
- one-on-one counselling
- group courses, tips and seminars on topics such as budgeting and using credit wisely
- debt management plans
Finding a credit counselling agency
Both not-for-profit organizations and for-profit companies offer credit counselling services.
Do your research to find a trustworthy organization and a qualified counsellor. Make sure you know what services they offer and how much they cost.
Research the agency’s reputation
Make sure that the agency is in good standing with a provincial or national association. These associations require members to maintain specific standards of practice.
You can find agencies through these associations:
- Credit Counselling Canada
- Canadian Association of Credit Counselling Services
- Ontario Association of Credit Counselling Services
In Quebec, budget and credit counselling services are often offered by Associations coopératives d’économie familiale (ACEF).
You can find the ACEF member list through this organisation:
- Coalition des associations de consommateurs du Québec (CACQ) (in French only)
Find out if there have been any serious or unresolved complaints about the agency. This includes late payments to creditors or false advertising.
Check for complaints about the agency with:
Be cautious when looking for help
Some companies offering help to pay off debt or repair credit are misleading consumers.
Be cautious. If it sounds too good to be true, it probably is.
Some agencies or companies may claim or misrepresent that they:
- can solve your debt problems quickly for a fraction of your debt
- can quickly and easily fix your credit score
- offer services as being part of a government program
Keep in mind:
- you may still need to pay fees even if your creditors refuse to negotiate with the agency
- it’s impossible to change or erase information that’s part of your credit history, unless information is inaccurate
- improving your credit score will take time
- you must show your creditors that your habits have improved and that you're paying back your debt on time
- agencies or companies should never try to coerce you into using their services
- if you’re not sure a company is part of a government program, contact the government department or agency that is responsible for the program
- ask them to confirm that the company’s representation is genuine
Find a government department or agency:
- Contact a federal department or agency.
- Contact your provincial or territorial consumer affairs office
Find out about the agency’s services and costs
The services that credit counselling agencies offer and the fees they charge can vary greatly.
Ask the following questions about their services to help find an agency that is right for you:
- is the first consultation free
- what services does the agency provide
- will the agency provide you with a written proposal describing how they will help
- what type of support will the agency provide to help you improve your money management skills
- will the agency provide you with monthly statements of payments
Ask about the counsellor's qualifications
Credit counsellors aren't legally required to have any specialized training. However, many credit counsellors have some training.
Ask about the counsellor’s qualifications, including:
- specialized training
- years of experience
The purpose of the training is to provide counsellors with the unique skills required to help consumers with their personal finances.
Are you comfortable with the credit counsellor
If the credit counselling agency’s services seems to meet your needs, ask to meet with a credit counsellor. This way you can see if it's a good match. No reputable credit counselling agency will charge you for the first meeting.
Make sure you trust the counsellor’s opinion and judgment. If you're not comfortable, ask for another counsellor.
Debt management plans
You can sign up for a debt management plan through a credit counsellor.
A debt management plan is an informal proposal your credit counsellor makes to your creditors on your behalf. It allows you to consolidate your debts into one affordable monthly payment. In some cases, you may not have to continue to pay interest on your debt. You'll usually have to repay 100% of your debts.
Before you enroll in a debt management plan, you’ll meet with a credit counsellor. They’ll assess your situation, help you make a budget and give you tips about dealing with your debt. If you decide to sign up for a debt management plan, they’ll contact your creditors on your behalf.
Your credit counsellor will ask your creditors if:
- they’ll reduce or eliminate the interest rate or fees on your debt
- they’ll extend the period of time which you have to repay your debt
Some of your creditors may not accept your debt management plan. In that case, your credit counsellor will usually suggest you make payment arrangements directly with those creditors.
If your creditors accept the debt management plan, you'll then make regular payments to the credit counselling agency. The agency will use your payments to pay off your creditors according to the plan. Keep in mind that creditors can still use collection agencies to recover the money you owe. Your credit counsellor can ask creditors to stop, but they have no legal power to make them stop.
What to consider before you sign up for a debt management plan
Think about the following before you enroll in a debt management plan.
How much it costs
Make sure you know what fees they charge, as these may vary.
These fees may include:
- initial set-up fee
- monthly administration fee
- application fee
- membership fee
- upfront fee or fee for each creditor
Ask if they’ll reduce or eliminate fees if you can't afford to pay them.
Will it save you money
A lower interest rate will save you money. But the credit counselling agency may charge you a fee for its services.
Compare the credit counselling agency’s fees with what you'd save in interest on the debt management plan. If the agency’s fees are higher than what you'd save, you may want to seek help from other sources.
The type of debts covered
Debt management plans may not cover all types of debt. You'll need to continue to make payments on any debt not included in your debt management plan.
They usually cover debts, such as:
- credit cards
- personal lines of credit
- unsecured personal loans
Debt management plans usually don't cover secured debts like mortgages and car loans. With secured debts, the company you owe money to may take your asset if you don't make payments.
Make sure that the credit counsellor explains exactly which of your debts the program will cover.
Understand your responsibilities
When you're following a debt management plan, make sure you:
- disclose all your debts
- make your payments on time
- don’t take on any additional credit
If you don't make payments on time, your debt management plan may be cancelled.
Review your agreement carefully
If you decide to sign up for a debt management plan, carefully read the agreement before you sign it. Make sure you understand what costs you’ll have to pay and what services you'll receive. Ask questions if you don't understand any of the terms and conditions. Keep a copy of the agreement.
What to do during your debt management plan
Ask the agency for regular written status reports on your plan. Also ask for receipts of all transactions involved with the debt management plan. This will provide you with proof that the agency made your payments. While you're following the plan, companies you owe money to may stop sending you monthly statements.
Carefully review your status reports or monthly statements. Make sure the agency is paying your creditors on time. This will avoid any late fees or negative entries on your credit report.
You can also monitor your progress by reviewing your credit report. It includes information on whether you're making regular payments.
Comparing your options
Everyone’s situation is different. Before making a decision, talk with different sources to see how they can help with your situation.
If you’re having serious financial problems, there are other options than debt management plans. You may consider working with a licensed insolvency trustee. A trustee is licensed by the Office of the Superintendent of Bankruptcy to handle debt problems under consumer proposals and bankruptcies. Both are legal processes you follow to pay off your debt.
When you meet with trustees, they’ll first assess your financial situation. They’ll typically provide this financial assessment for free. If it suits your financial situation, you may then consider working with them for a consumer proposal or bankruptcy.
To help you decide on the best option for your situation, you may want to ask the following questions:
- how much of your debt will be repaid
- what type of debts will be repaid
- how long you'll be making payments
- how much your monthly payment will be
- what happens if you can't make a monthly payment
- what will happen if your financial situation changes and you need to reduce your payments
- can creditors or a debt collection agency continue to contact you
- what will happen to your assets
- what will happen to your credit report
- how much you'll pay in fees
- can a creditor change their mind and withdraw from the agreement
Compare the advice you get from each reputable source before you decide which option is best for you.
Filing a complaint about a credit counselling agency or credit counsellor
Provincial and territorial governments are responsible for regulating credit counselling agencies and investigating consumer complaints.
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