Due to its advantageous location near downtown Vancouver, the town of Richmond has been growing in size and popularity with every passing year. Unfortunately, that increase in trendiness has caused a major spike in both housing costs and living expenses, leading to financial problems for many residents. However, people’s struggles with debt cannot necessarily be attributed to any one cause. Everyone’s financial situation is different in some way.
Luckily, there are services that can help with such issues and one of the more beneficial ones is credit counselling.
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When Credit Counselling Becomes Necessary
Realistically, the vast majority of Canadian residents cannot get by without taking on some debt. That said, there’s a huge difference between carrying a credit card balance and having so much debt that you can’t even manage it reasonably. If the latter case is starting to look like yours, it might be time to seek out credit counselling.
Credit counselling services are established to help people overcome their financial problems. Whether you need help making a proper budget, looking for advice about money management, or you’re under massive debt with no way out, a credit counsellor or counselling agency can provide a solution. Nevertheless, credit counselling cannot help unless you know when the right time to seek it is. In the end, let the notion of “before it’s too late” be your guiding light.
How to tell if you need credit counselling?
- You cannot manage your debt payments using your income or savings
- You’re being plagued by high interest rates and late penalties
- You’re about to lose your house because of overdue mortgage payments
- Lenders and debt collectors won’t leave you alone
- Filing a consumer proposal or declaring bankruptcy are starting to look like your only options
Essentially, it’s best to seek out credit counselling before you encounter the risk of a serious legal procedure. While both consumer proposals and bankruptcies can be good last resorts under dire circumstances, they can also have a serious negative impact on your finances as a whole. Therefore, it’s important to avoid them at all costs. Thankfully, a credit counsellor can provide you with the knowledge you need to do so.
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Selecting the Right Credit Counselling Service
Before you choose the first credit counselling source you find, take a step back and think your decision through carefully. It’s important to complete some research and make sure you’re going with a legitimate company that has your best interests in mind.
Nonprofit vs. For-profit
For starters, during your search, it’s likely that you’ll come across both nonprofit and for-profit credit agencies. Although an agency that charges for their services may have a few more effective tactics up their sleeves, you must also consider how their fee might be too pricey for you to afford. After all, if you’re already in debt, you need every penny.
Reputation is Important
It’s also essential to look for an agency with a good reputation and success rate. Check out customer reviews and make sure no serious complaints have been made against them. You can even visit them to confirm that their business is real and holds a valid license to operate in British Columbia. Any good credit counsellor should be willing to give you a free consultation and be prepared to answer any questions you have. All information that passes between you should be kept confidential. Be sure you feel comfortable talking to them before you sign up for any service they offer.
Wondering how to handle your first credit counselling session? Find out here.
Watch Out For Scams
Additionally, it’s also extremely important to confirm the legitimacy of a credit counselling service because there are many scam artists out there, who prey upon those trying to resolve their financial woes. While there are real for-profit agencies out there, no lawful credit counsellor will ever demand upfront payment, or to see your banking information, or your credit card number, at least not until they’ve helped you properly.
The Potential Effect On Your Credit
Although credit counselling in Richmond can help you in a number of ways, one of the best things about it as that, unlike many other debt solutions, it won’t have any initial effect on your credit report or credit score.
However, some of the products and programs they refer you to might have an impact. As your credit might already be damaged due to your financial issues, it’s better not to let your credit health decline any further unless it’s absolutely necessary.
For instance, a credit counsellor can refer you to debt consolidation, meaning solutions that allow you to pay off your unsecured debts using one action. Typically, this is done in one of two ways, either by applying for a debt consolidation loan or entering a debt consolidation program. Both of these solutions can have a direct impact on your credit because they involve payments that would be reported to Canada’s credit bureaus in some capacity.
What happens with a debt consolidation loan…
A debt consolidation loan is a credit product like any other, in that you would apply for it and be given a specific payment plan within which you must repay what you’ve borrowed to avoid defaulting. If you make all your payments responsibly, your credit score will gradually increase and improve your credit report as a whole. Then again, if you aren’t being responsible, any payment you’re late on or miss completely will cause your credit health to decline, leading to worse financial results.
Click here to see how bad a debt consolidation loan will look on your credit report.
What happens with a debt consolidation program…
A similar effect can be seen when you enter a debt consolidation program, which a credit counsellor can help you with if you don’t qualify for (or don’t want) a debt consolidation loan. Here, you’ll give your payments directly to your counsellor, who will send them to satisfy your creditors, again over an agreed-upon payment plan.
If by the end of your plan, you’ve managed to pay your remaining balance in full, the creditors should report your debt as paid in full to the bureaus, leading to positive results. However, if your debt isn’t fully paid, they may only report it as settled. This would, of course, have the opposite effect.
Check out this infographic to learn more about what affects your credit score.
What to Expect from Credit Counselling in Richmond
With everything above being said, you may still be hesitant about seeking credit counselling. After all, there are some risks involved. However, even if your financial health and credit report end up with a bit of damage, that negative effect will be far worse if you wait and allow your debt to get even more out of hand. In addition, consider the fact that no credit counsellor is a miracle worker. Once the process has begun, you will have to put in the majority of the effort.
While you cannot expect an instantaneous solution, what you can expect is this:
- Help getting any collection calls and wage garnishment against you to stop
- Professional advice about budgeting, debt, and all things personal finance
- Referral to or implementation of various debt management and credit improvement solutions
Want a few more debt management tips? Check this out.
Getting The Credit and Debt Help You Need
If you’re currently struggling with credit or debt problems and are interested in seeking the help of professional, Loans Canada can help match you with the best solution based on your unique needs.