Credit counselling can help you manage your money better and pay down your debt in less time than you ever could on your own. It's a solution that can help you when you're paying bills late, getting collection calls, or facing mountains of bills that feel out of control.
Working with a certified credit counsellor with a non-profit credit counselling agency, you can take back control of your finances and start working on your goal of debt freedom. When you're struggling to keep up, credit counselling can help you bring order and direction back to your life.
When Do You Need Credit Counselling?
It's not always easy to see when you need help with your debts. These are some of the signs that you should start looking for debt solutions:
You use credit because you keep running out of cash.
Taking out cash advances on your credit cards, despite high fees.
Applying for higher credit limits because your cards are maxed out.
Taking out additional loans such as debt consolidation while continuing to use your cards, making the problem worse.
Borrowing money from family or friends to pay your bills or essentials.
Having too many credit cards or applying for more.
Step One: Debt Assessment
The first thing that a certified credit counsellor will do is assess your financial situation. They will take a look at all of your debts, your income, your major expenses, and any assets, savings, or investments and properties you possess.
With that information, they can recommend a way forward for getting out of debt.
Make sure you're working with someone who understands life expenses. There is no such thing as one budget that fits everyone's circumstances. Your expenses are a reflection of your life's realities, and while there may be changes you need to make, the solution has to take into account your realities.
Step Two: Debt Solutions
The next step is finding out how to solve your debt. There are many different ways you can deal with debt, including:
A Debt Consolidation Program, where you roll all of your payments into one at a lower interest rate;
File for bankruptcy or a consumer proposal, though this could involve evaluating or liquidating assets and damage your credit score;
Using home equity to pay off debts at a lower interest rate;
A debt consolidation loan
Budgeting a plan that lets you keep up with all of your bills.
A certified Credit Counsellor will go through all of your options with you to find the right one.
Step Three: Money Management
Whatever debt solution you use, you need a plan to repay it all. A good solution can give you some relief on interest rates or speed up your repayment plan, but you still need to manage your money to keep up with those payments.
Better budgeting techniques and spending habits are essential when you want to get out of debt. A certified credit counsellor will introduce you to the tools you need to make sure you can make a budget that works and stick to it.