You’re overextended with debt. Making payments—even minimum payments—is becoming impossible. Collection calls are starting to come in. Your nights are restless, and now you’re even bickering with your partner. Then, a light bulb goes off: I’ll get a Debt Consolidation Loan through my bank! So you meet with a loan rep, fill out the loan application, and give the bank your consent to perform a credit check. Unfortunately, those late and missed payments have caught up with you, negatively affecting your credit rating and lowering your credit score. In addition, you don’t have assets you can pledge as security and you aren’t willing to ask a family member to co-sign the loan. As a result, the bank isn’t willing to take the risk of consolidating your debts, and so they decline your consolidation loan application.
If this sounds familiar, you’re not alone. A recent survey found that Canadians are experiencing increased stress levels caused by mounting financial pressures. Another report reveals that over 40 per cent of Canadians rank money as their greatest stress, and more than half of Canadians are embarrassed about their financial position.
An Alternative to Debt Consolidation Loans
Thankfully, there is another option that can help decrease your financial stress before it causes further personal and health issues: a Debt Consolidation Program (DCP). While a DCP with a not-for-profit credit counselling agency, such as Credit Canada, can’t offer a loan to pay off your debts, they will work with you in negotiating more manageable payments and interest rates with your creditors.
Your credit counsellor instead acts as a middleman between you and your creditors so that the process doesn’t add to your stress level, but in fact reduces it greatly. Oftentimes, this is a better route to go as many people who obtain a loan fall into the trap of continuing to use their credit cards, racking up more debt on top of the new loan.
How a Credit Canada Debt Consolidation Program Works
1. Contact a Counsellor
The first step is reaching out. You can make an appointment to speak with or meet in-person with a certified Credit Counsellor by calling 1.800.267.2272. All counselling sessions and appointments are free, confidential, and judgement-free too!
2. Review Your Situation
You and your Counsellor will discuss your income, expenses, assets, and debts. Next, your Counsellor will explore the best options that are available to you and review them with you.
3. Develop a Plan
You and your Counsellor will establish the total amount of your unsecured debt, and whether or not your repayment ability meets the amount needed to repay your unsecured debts in a realistic time frame (usually 3 to 5 years).
4. Release of Information
Your Counsellor will need the names, addresses, and account numbers of your creditors. Next, you will sign a Deposit Agreement outlining your minimal monthly payment, processing fees and other program requirements.
5. Cut the Cards—and Obtain a Secured One Instead
While it may sound scary, you will need to destroy your credit cards, as your creditors will not allow you to continue using their accounts while you are on a DCP. Often, our clients have maxed them out anyhow, so there’s nothing to lose. If you need the security of plastic, however, your Counsellor can work with you to help you obtain a secured credit card (this will also help to rebuild your credit).
6. The Negotiations Begin
Your Counsellor will set up a Debt Consolidation Program for you and establish the payments you can afford to send to each of your creditors. They will send out paperwork asking each creditor to accept the payments and reduce or eliminate the interest being charged on your debt.
7. Monthly Payments Begin
If your creditors accept the proposal, you will make a set monthly payment to the non-profit credit counselling agency your Credit Counsellor represents and they will disburse your funds to the creditors according to the accepted plan. You will continue to maintain your monthly living and personal expenses, such as housing, utilities, insurance, groceries, etc., but your Counsellor will provide financial coaching and help you establish a monthly spending plan so that you are able to meet all of your financial obligations.
8. The Path to Financial Freedom
At last, the light at the end of the tunnel. You will now know how much to pay each month, when the payment is due, when the program will be completed, and when you can expect to be completely debt-free.
Contact Credit Canada for debt help
If a Debt Consolidation Program isn’t a viable option for your particular situation, your Counsellor will discuss other options, which could include a consumer proposal or bankruptcy. (If you’ve explored all other options and simply can’t make ends meet, there is no shame to be had here.) Whatever path you choose, your Counsellor will provide referrals and be there to support you.
You don’t have to struggle on your own and get deeper into debt and stress. Call Credit Canada at 1.800.267.2272 and learn how we can help you get out of your negative debt cycle. And if you don’t want to take our word for it, see what our clients are saying!