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Credit Counselling vs. Debt Settlement: What's My Best Option?

by:
Karina Arancibia

Managing debt can be frustrating, especially if you've been turned away by banks or credit card providers. Before deciding on how to resolve your debt, it's helpful that you learn the differences between credit counselling and debt settlement, as they can each lead you down very different paths. In knowing the difference, you can have a clearer idea on how to move forward, resolve your outstanding debt and finally get back on track.

Knowing Your Options

Your current financial standing plays a role in what your options are when seeking debt help. Chances are, if you’re maxed out on credit cards, you won’t be able to accrue more credit. Sure, you can use a payday loan, but the interest and repayment schedule aren’t worthwhile – not to mention the risk of falling into even more debt and the dreaded payday loan cycle.

Don’t take that chance. If you can’t get a loan through a bank, or you're being harassed by collections agencies, seeking a certified credit counsellor puts you on the path towards rebuilding your finances at your own pace. There are many debt settlement organizations that claim to be linked to the government or provide government assistance to “settle your debt,” but if it's too good to be true there's a very good chance it is.

Stay away from debt settlement companies that:

  • Claim are government regulated

  • Are for profit

  • Provide no guarantee of success

  • Require costly upfront fees

Don’t feel pressured to settle for these “quick-fix” organizations. Your situation might seem hopeless, but it’s not! By speaking with a certified credit counsellor, not only will you be given free, unbiased advice on your best option for resolving your debt, but they can also notify you of your rights and help stop collection calls. 

Debt Settlement: The Facts

Some unscrupolous debt settlement companies use tactics or “buzzword” terms to get your attention. You might have even seen their advertising on TV, but don't be fooled. Even if they are operating within the law (or skirting the line of the law), they don’t have your best interests in mind. There have been cases where debt settlement companies claiming to work with the government will charge clients thousands of dollars in upfront fees (some for several years!) while providing no debt resolution insight. 

Although legislation has tightened to restrict the activities of unscrupolous debt settlement companies, they do still exist. While there are limits on the amount of total fees they can charge within a certain timeframe, you should still do your due diligence and thoroughly research any debt settlement company you are considering. If you're not sure, give us a call at 1.800.267.2272 and one of certified credit counsellors can help you assess your best option.   

Credit Counselling 101

For most debtors, credit counselling provides a more holistic (and realistic) approach to resolving debt by dealing directly with an experienced, unbiased professional who is trained to handle difficult debt situations and creditors on a one-on-one basis. They have years of hands-on experience dealing directly with a diverse variety of cases, and they understand that each situation is unique based on a person's income level, employment, financial responsibilities and obligations, among many other things.

One of the biggest advantages of working with a credible credit counsellor is that they will look at your entire financial situation, from your monthly expenses and debt to your credit score and credit rating, and then help you customize your budget so that you can pay off your debt comfortably and achieve your financial goals, whether that's setting up an emergency fund or saving for a downpayment.

They can also consolidate your debt and negotiate with your creditors to either reduce or completely stop the interest, which will give you a bit of breathing room to finally pay down your debt. Working with financial professionals who sincerely care about you and your financial future can help guide you and provide more clarity and reassurance than empty promises you may be hearing elsewhere. 

Conclusion

Paying off debt requires patience, commitment and persistence. Getting help from credit counselling experts such as Credit Canada, ensures you can put your financial worries behind you once and for all, and forge a better future for you and your loved ones.

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Topics: Debt Settlement

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