Carrying debt can be very stressful. This is especially true if you’re starting to fall behind on payments and are now dealing with calls from debt collection agencies. When you need debt advice in Canada, who can you turn to?
Obviously, if you’re looking for debt help services, Credit Canada is one option. But, we aren’t the only option. There are many places you could turn to for debt relief advice aside from us.
What are your options for debt help advice? Which sources of help are the best to use when your goal is becoming debt free? In a recent Moolala podcast, Gursh Singh of the Credit Canada team explained some of the options people have for seeking debt advice. Here’s a quick paraphrasing of some of Gursh’s key talking points:
How Do People Know When It’s Time to Ask for Debt Help?
The turning point for many people (aside from losing sleep over debt) is that they know they’re in need of help when they’re using credit to keep up with debt payments. This is a strong indication that their debts have outpaced their ability to repay them.
The phrase “robbing Peter to pay Paul” comes to mind. While using a credit card to pay off outstanding debts might silence collectors, all it does is put the debt onto a new account (possibly one with a higher interest rate). The amount of money owed doesn’t shrink.
In the podcast, Gursh Singh likened it to “monthly payment hot potato.” It just goes on and on until, eventually it stops because you’ve reached a breaking point—but now your card balance is maxed out and you need credit card debt advice.
Need Help Now? Get advice for dealing with credit card debt in Canada!
Your Debt Advice Options
Trouble with debt doesn’t usually happen overnight. It’s something that often builds slowly over time—even without you noticing. However, when you do notice a problem with debt, it’s important to seek help as soon as possible.
If you can, don’t wait until you fall behind—if this is happening to you, look for financial debt counselling right away. When it comes to seeking money advice, you have a few different options available to you, including:
- Nonprofit Credit Counsellors
- Licensed Insolvency Trustees (LITs)
- Debt Consultants
- Money Coaches
- Financial Advisors
Each of these specialists have their own unique areas of expertise and can help you with different things. However, not all of them will be able to provide debt help advice if such services aren’t their core focus.
Here are some brief explanations of who these people are and what they do:
What Is a Non-Profit Credit Counsellor?
A non-profit Credit Counsellor offers free, confidential one-on-one money management support and debt repayment solutions. Credit Canada is one example of a nonprofit credit counselling agency, though there are many others.
A nonprofit Credit Counsellor might offer things like debt consolidation options, money management advice, and help in creating a monthly budget (amongst many other advisory services).
When seeking a nonprofit credit counselling agency, it’s important to verify that they are accredited. Accreditation helps to verify that the agency is trustworthy and will work in your best interests.
These nonprofit organisations get the money they need to keep operating from fees and donations associated with their debt consolidation programs. These funds are then used to make their counselling and education services free for everyone.
What Is a Licensed Insolvency Trustee?
A for-profit service professional that is usually attached to a firm. They are licensed by the Office of the Superintendent of Bankruptcy (OSB). LITs typically oversee financial services like consumer proposals and bankruptcies (hence the OSB licensing).
These processes will involve paying either none of the debt owed to your creditors or a portion of that debt. Meanwhile, the LIT is paid a fee for overseeing the insolvency process.
To protect consumers, LITs are regulated by the OSB to ensure that they are in compliance with the administration of the Bankruptcy and Insolvency Act. This act poses several limitations on how trustees can act in regards to insolvency proceedings.
LITs often provide services in very formal legal proceedings. Also, their services are best reserved for when you don’t have a realistic option for paying back your debt. Insolvency proceedings can be catastrophic for your credit score, so they are often saved as a last resort.
What Is a Debt Consultant?
If you Google the term “debt consultant,” you might find a variety of different services. The thing is that people going by this term may not be nonprofit Credit Counsellors or LITs.
Instead, they provide a less-regulated service than non-profit credit counselling agencies or Licensed Insolvency Trustees. For a fee, a debt consultant will assess your current financial situation and may perform actions like:
- Negotiating with creditors on a case-by-case basis to request payment or settlement terms;
- Enlisting the help of an LIT or nonprofit Credit Counsellor; or
- Putting you in touch with a lender (such as for a debt consolidation loan).
What you’re really paying for is getting someone to do the footwork for finding a debt relief solution. When you’re up against the proverbial wall, it can be difficult to do this footwork yourself—which is where a consultant can prove useful.
However, reaching out to a nonprofit Credit Counsellor or an LIT agent directly can help cut out the middleman and save you both time and money. So, this avenue of debt help isn’t for everyone.
What Is a Money Coach?
A money coach is a personal finance expert who usually sets up ongoing one-on-one coaching to help you meet a specific financial goal. While they aren’t typically focused on providing debt help advice, their coaching can sometimes be useful for getting or staying out of debt.
For example, they might provide coaching and advice to help you improve your spending habits so that you can save more money to apply to your outstanding debt.
Money coaches may help you tackle debt as a part of achieving your financial goals. However, their services aren’t usually directly targeted at eliminating debt. In most cases, money coaches are better suited for preventing debt by providing advice than they are for providing debt relief services.
Additionally, these coaches operate as for-profit entities, though the exact fees charged will vary from one coach to the next. It’s common for a money coach’s services to cost several grand—which is money that you may not have if you need debt advice!
What Are Financial Advisors?
A fee-for-service or commission-based advisor who helps provide advice for investing your money. Their services are mostly meant for those who have already gotten out of debt.
If you’re looking into a financial advisor, it’s important to look into how they’re paid before entering into an agreement with one. However, a financial advisor isn’t usually a good option for someone seeking debt relief advice or services, as they may be too pricey.
What Should You Look for in Someone Providing Debt Advice?
Regardless of what kind of debt advice service you want to use, there are a few things you should look for in someone who provides that advice. Gursh uses a three-pronged approach to help tell the useful debt advice providers apart from the ones who aren’t a good choice:
1. Check for Industry Accreditation
One of the first things to look for is whether the advisor has any kind of accreditation from an independent organisation. For example, Credit Canada is an accredited member of Credit Counselling Canada (CCC).
Such accreditation is important for ensuring that the person you go to for debt advice will uphold industry standards for quality and ethics. A non-accredited “advisor” may not be accountable for bad advice.
Additionally, it may be helpful to verify the specific financial qualifications of the advisor you will be working with. Even in a well-run organisation, there’s always a chance that one advisor may be more or less skilled than their coworkers.
2. Confirm Whether They Are Non-Profit or For-Profit
If the person providing your debt advice is getting paid, it’s important to know how they’re paid. If there is a conflict of interest—such as they get a commission for selling certain financial products—that could affect the quality of advice you receive.
3. Read the Advisor’s Business and Google Reviews
One of the best ways to discover how well a debt relief service provider or financial advisor will treat you is to read reviews from their other clients. Debt counsellors who provide top-quality service tend to gather positive reviews. However, a large number of negative reviews may be a good indication that you should stay away from a certain advisor.
It also helps to check if they’re registered with the Better Business Bureau (BBB) and to confirm their rating before signing up for debt help.
These are just a few of the things you should look for when choosing a credit counselling agency or other financial service provider. If you need debt advice in Canada, reach out to our team today!