What Do I Need to Know About Speaking to a Debt Professional?Nov 21, 2018
Debt repayment is one of the top goals on Canadians’ financial lists each year, yet many Canadians have trouble making a dent in their balances. Our recent Affordability Index revealed that three-quarters of Canadians carry personal debt — and nearly a quarter feel overwhelmed by their debt and don’t know what to do about it.
The problem is, personal debt has become a hurdle for a significant number of Canadians. Debt is affecting their ability to afford basic needs and prepare for major life milestones like buying a home, having kids and saving for retirement.
If you’re ready to speak to a debt professional, here are a few things you need to know beforehand:
Not all debt professionals are the same
If you think of debt repayment like a home improvement project, you know that you need the right tools to complete the job. The same is true when you’re looking for the right debt professional to help you repay your debts.
Certified credit counsellor – A credit counsellor can help you learn to budget your money, manage your money more efficiently, and also set you up with a debt management plan. A DMP is also referred to as an informal proposal which allows the credit counsellor to speak to creditors on your behalf. They have the ability to negotiate with creditors to extend the amount of time in which you pay back your debts, and also the interest rates.
If you’re thinking of speaking to a credit counsellor to help with debt management, ensure that you follow these guidelines issued by the Financial Consumer Agency of Canada.
Bank or credit union – Your financial institution can offer you a consolidation loan which will combine all your unsecured debts into a monthly payment. A few things to consider if you’re thinking of using this debt relief option:
- You need to apply, and be approved for the loan. Banks usually rely on your credit score and income to determine your ability to repay the loan.
- You will be charged interest on your loan.
- While paying your loan each month, it’s advisable to follow a budget and reduce your expenses to avoid adding debt to those newly-paid credit balances.
A consolidation loan can allow you to skip the headache of paying multiple debt balances each month and free up cash flow. For a detailed visual about how debt consolidation works, visit the FCAC.
Licensed Insolvency Trustee (LIT) – An LIT is the only debt professional qualified and licensed to assist you with a consumer proposal or bankruptcy. However, you don’t need to be drowning in debt in order to speak with an LIT. Here are a few facts you should know:
- Your first appointment with an LIT is cost-free and no-obligation.
- An LIT will go over all details of your financial situation, listen to your concerns and answer your questions before making a recommendation.
- An LIT can refer you to other debt professionals or recommend other debt repayment options, based on your specific needs.
- If you require a consumer proposal or bankruptcy as a last resort debt option, your LIT will be with you each step of the way, working on your behalf and helping you get a fresh financial start.
How do I know it’s time to seek help?
When considering debt help, it’s tough to take the first step. Here are some questions to ask yourself:
Is my debt making me stressed or anxious?
Am I skipping bills or paying them past due?
Am I consistently making only minimum payments on my debt balances?
Am I receiving calls from bill collectors and creditors?
Am I using my credit card to stretch my income?
If you answered “yes” to any of these debt warning signs, it’s a good idea to speak with a debt professional as soon as possible. When you deal with debt before it becomes unmanageable, you’ll have more options available to repay your debt, and, get back on track quicker.