Credit counselling

Credit counsellors can help you make a plan to reduce and repay your debts. Credit counsellors inform creditors (the companies that you owe money to) that you are making a plan to pay back your debts, and may be able to negotiate reduced interest or fees on the debt. Credit counsellors can also provide you with information and education about money management to avoid future, or further, debt issues.

Even if credit counsellors are non-profit, they may charge a fee for their services, and may take a percentage of the repayments.

Cost: Credit counselling agencies cannot charge more than a one-off fee of $50 (per creditor) before you start making payments when they are paying by installments. They can then charge up to 15% of each installment made. When a credit counselling agency negotiates a single payment to creditors, the credit counsellor can charge up to 10% of the original debt amount for their services.

Process

You should contact a credit counselling agency to discuss your options. A list of accredited non-profit credit counsellors can be found at: Ontario Association of Credit Counselling Services; Canadian Association of Independent Credit Counselling Agencies; Canadian Association of Credit Counselling Services; or Credit Counselling Canada.

You should check the reputation of the credit counselling agency and ensure that it is accredited by a reputable body.

A credit counsellor will go through your income and expenditure to understand your financial situation and come up with a debt management plan.

If you agree to the plan, you will have to sign a contract agreeing to pay the credit counselling agency each month, so that the credit counselling agency can pay the creditors.

Check the terms of the contract and make sure you understand what it required of you, and whether you are required to pay any fees directly to the credit counselling agency.

There is a 10 day cancellation period once you have signed and received your written contract with the credit counselling organization.

Find out more: FCAC – information about getting help from a credit counsellor | CLEO – information about credit counselling and debt settlement