Consumer Credit Counselling, How Does it Work?
In terms of understanding indebtedness, credit counselling is considered to be the most efficient debt relief approach for Canadians. Through credit counselling you will learn how you can stay out of debt in the future and manage your finances wisely. If your debt is not more than $10,000, credit counselling is a more feasible choice for you to manage your debt. This is because credit counselling allows you to negotiate what you owe to the creditors. Besides, it teaches you on how to control your finances efficiently.
Moreover, if you owe to several creditors, credit counselling is a better option than debt settlement as it allows you to reduce the principal. This way, your debt loads will be lessened as you can pay it off in a few years. Although the planning in credit counselling may take longer, its long term effect can be perceived to be useful to ensure that you can stay out of debt.
Furthermore, may it be credit counselling or any debt solution such as debt settlement that suits your financial constraints, it is significant to understand each alternative and how each works. Also, various companies offering credit counselling caters services that vary, yet the primary planning includes the information listed below.
Consultation and Planning
There are certain significant highlights on what can happen during credit counselling which are listed as follows:
Your credit counsellor will conduct a thorough check of your financial status to create a plan that will help you stay out of debt. This process is similar to what can occur in a consumer proposal and other debt-relief approaches. However, a consumer proposal can severely impact your credit rating for a couple of years after filing. Besides, there are huge variations on how credit counselling and consumer proposal can affect your credit repute.
Planning your budget can greatly impact how you can resolve indebtedness. Credit counselling is a useful tool for you to come up with how to manage your finances. Also, learning how to create a feasible budget based on your income and expenses can hinder you from overspending. If you live on a budget and learn good money habits, you can prevent getting any forms of consumer debt.
Moreover, it can prevent you from getting into the situation of filing for bankruptcy. Those who have undergone credit counselling is taught on how to maximize their potential in formulating a budget without sacrificing the comfort of living.
Negotiation with Creditors
In credit counselling, your agency will reach out to your creditors in negotiating to reduce your debt, including your interest rates. This is primarily the main benefit of credit counselling. By minimizing your interest rates, you can free up some money from your monthly debt payments. This way, your monthly payments will be lowered.
On the contrary, if you prefer to pay a simultaneous amount every month, regardless of your monthly debt payments being reduced, you will end up paying your debt sooner. This is because, when you pay more than the minimum amount, the percentage of it will be deducted in your principal.
Role of Your Credit Counsellor
Your credit counsellor will work as the middle man during debt payments. Same as in a consumer proposal wherein you will be making one payment; in a credit counselling, you’ll pay your counsellor a single payment. This payment will be issued to your creditors. By doing so, you can avoid missing payments, especially if you’re paying to several creditors each month. Additionally, your credit counsellor acts more on coping up with your outstanding principal, which makes it less possible in negotiating to reduce your principal debt.
Is Credit Counselling the Right Choice?
To find out more whether your current financial constraints calls for a consumer proposal or credit counselling, simply fill out the debt relief form HERE.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
|2||Credit card 1||$6,812|
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.