Each year over a quarter of Canadians use credit and debt counseling in Toronto to help with their debt and money management problems. They’ve tried to get out of debt on their own but couldn’t simply make it work and so they turn to a credit counseling company to help them work with their creditors, establish a monthly payment plan they can afford, and to create a budget they can stick to.
However, a large number of these debt counseling businesses are unregulated. They employ so-called experts who call themselves ‘debt consultants’ but are actually untrained and unlicensed. Most will just charge a fee and then refer the debtor to a qualified debt professional, like a Licensed Insolvency Trustee, a Certified Credit Counsellor or an Accredited Financial Counselor.
How can you as a consumer protect yourself from the dishonest schemes that some shady organizations practice?
Here are some tips to help you know how to choose legit and trustworthy agencies:
Be careful of ‘quick fixes’
Some companies offer what is called a “debt settlement program” with claims that it can reduce your debt by up to 65% and that it you can get out of debt in less than six months. While this companies may be able to settle one or more of your debts, the arrangement can be risky and do not always work. One very big risk is the bad hit to your credit rating. The debt settlement company will ask you to stop making payments to your creditors while a settlement is being negotiated and instead send your payments in a savings account. During the few months that you stop paying your debts, the due date runs it’s course and your debt becomes past due. Once past due, the debt settlement company will settle the amount with your creditors. These late payments, however, are reported to the credit bureaus, and your credit score drops, and there is a chance that you will receive collection calls. Late payments that are put down on your credit report will remain on record for up to seven years. With this bad credit rating, you'll have difficulty getting new credit cards and loans, and you may even find it hard to get a job.
Avoid dealing with debt settlement companies that promise more than they can deliver, particularly when they charge you fees before they have settled your debts and guarantee that they can make your unsecured debts go away.
Get expert help
Rely only on accredited, qualified financial professionals, like a credit counsellor, an accredited financial counselor, or a licensed insolvency trustee.
Credit counsellors are certified by the Canadian Association of Credit Counselling Services, financial counselors are accredited by the Association for Financial Counseling and Planning Education (AFCPE) and licensed insolvency trustees are regulated by the Office of the Superintendent of Bankruptcy. These debt professionals work with many credit and debt counselling agencies, providing knowledgeable assistance and giving the best possible advice for your situation.
Consider all your options
A credit counsellor, financial consultant, or licensed insolvency trustee who cares deeply about their clients will not be biased in selling their services. They will take the time to fully understand your situation and explain all of your options, which may include:
- a debt consolidation loan or refinancing
- a debt settlement
- a debt management plan through a not for profit credit counsellor;
- a consumer proposal
- filing for personal bankruptcy
There are plenty of accredited agencies ready and willing to provide credit and debt counseling in Toronto. Always take the time to research the provider you are considering to make sure that they work in partnership with accredited and qualified debt professionals. When you choose wisely, you can really get the proper guidance and help you need to turn your financial life around.
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