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Breaking free of a debt cycle can be done on your own with reduced spending and budgeting. However, depending on the type of debt and how much you have, you may want some help.

There are many different options to consider when you want to get out of debt, but one of the best first steps is attending a credit counselling session. This article will teach you all you need to know about credit counselling, the many advantages it carries, and how to know if it’s right for you.

What Is Credit Counselling?

Credit counselling is a process and service that is used to help people get out of debt through a variety of tools, like education, budget creation, and personalized tips and tricks. It’s all about teaching people how to reduce and eliminate debt while implementing practices that will help them stay out of debt in the future.

It is often done by a credit counselling agency that employs qualified and trained individuals who are experienced in helping people deal with their finances. While they can sometimes be free, some credit counselling agencies and services will charge a fee. 

How Does Credit Counselling Work?

For your first session, you should come prepared with some materials to help brief your expert on your life and financial situation. This includes your personal information, your income, assets, debts, and your financial goals. Once they have this, they can start to see what needs to be done to improve your finances and finally get you out of the cycle of debt.

You and the expert will devise a plan and come up with a budget. It will then be up to you to implement it into your life. You will meet periodically with the counsellor and will of course be able to send them any questions or concerns you may have throughout the process. They will work with you and give suggestions on what to do, but the choice is ultimately yours when it comes to what plan you use.

How Can Credit Counselling Help You Break Free From The Cycle of Debt?

These individuals normally have years of experience and can give your expert advice, and plans for getting out of debt. They will know exactly how to help you budget, cut costs, make payments, and more. 

In addition to that, the credit counsellor you find yourself working with may also be able to help you:

  • Manage your payments
  • Reduce your interest charges and fees
  • Create an affordable budget
  • Avoid bankruptcy

Credit Counselling Debt Solutions To Help You Break The Debt Cycle

Before you hire any credit counselling service, make sure they’re a legitimate enterprise. A certified credit counsellor can usually offer you several debt relief solutions, including:  

Debt Consolidation 

A debt consolidation loan lets you pay down multiple high-interest debts using a single monthly payment plan. Ideally, that loan will also feature a lower interest rate, which can save you money over time. Plenty of lenders offer debt consolidation loans in Canada and any qualified credit counsellor should be able to help you locate the best deals around. 

That said, a debt consolidation loan isn’t always a perfect solution, because you have to qualify for it. If you have bad credit, a low income, or an unacceptable level of debt, the lender may doubt your ability to make payments and won’t offer you an appealing loan.    

Debt Management Program

A debt management program (DMP) is an informal process that might be even better for your situation since it requires you to hire a credit counselling service. It’s their job to negotiate with your creditors, then offer them a settlement that, if accepted, allows you to repay over a maximum period of 5 years. Moreover, they may be able to stop any additional interest charges or have them dropped completely.

However, do note, DMPs have limitations too. For one, the process is mostly restricted to unsecured debts, like credit cards. Secured debts rarely qualify due to the assets involved. Plus, the process isn’t legally binding, so creditors don’t have to accept it or stop contacting you. If that happens, your credit counsellor must re-negotiate or look into other alternatives.    

Consumer Proposal

Unlike the options above, a consumer proposal is a legally binding process that can free you from most unsecured debts. In this case, a Licensed Insolvency Trustee (LIT) must oversee the negotiations with your debt sources. If a deal is reached, you’ll make monthly payments for up to 5 years. 

Consumer proposals aren’t without their faults either. While you get to keep your assets and only repay a portion of the principal, your credit can be negatively affected for up to 3 years.


When your debts are totally unmanageable, bankruptcy is another legal process that you can file for with the help of a LIT. Under this federally-regulated program, you must make a series of payments toward the courts, starting with a base amount of $1,800. In exchange, your debts will be forgiven and all collection penalties against you will cease.   

Unfortunately, bankruptcy can have a 6 to 7-year negative impact on your credit and lead to the seizure of your assets as compensation for your creditors. If your salary is over a certain threshold, you’ll also be ordered to make surplus income payments for a certain period of time. 

How To Choose Which Credit Counselling Agency You Should Work With?

So, now that you know the various different benefits and advantages of credit counselling, how do you know which agency to go with? There is a good chance there are multiple different debt and credit counselling agencies in your city, but there are a few things you can do to ensure you select the right one.

Do Some Research

First of all, you want to make sure the agency has a good reputation. They should have good reviews on reputable sites and it’s even better if you can get a first-hand account of what it’s like to work with them. You should also pay attention to their advertising and the claims that they have made, if they sound too good to be true, there is a large chance that they are.

Consider The Total Cost

Next, you want to consider the cost of the agency as different agencies will charge different fees for their credit counselling services. Some will be relatively affordable, while others will charge more. If you are seeking out their services, you are likely struggling with debt and credit issues, so the cost can be a big factor in your decision. Of course, you should always ensure that the individuals at the agency are qualified to be working with you and giving you advice and guidance.

Make Sure You’re Comfortable

And lastly, you want to ensure that you are comfortable with the agency and counsellors you are working with. You are talking about a very sensitive topic, so you want to be comfortable with the situation through and through.

What Should You Expect When You Enter Credit and Debt Counselling?

It can be quite intimidating to walk into your first ever credit counselling session. The first thing to know is that everyone you deal with is a professional and will not judge or be subjective about your unique situation. Also, everything you speak about with the counsellor about will be kept private. They will treat you with respect and should never judge you for your decisions in the past, present, or future.

Debt And Credit Counselling FAQs

Will credit counselling impact my credit history or credit scores?

Credit counselling doesn’t actually affect your credit. However, the programs or products you sign up for can. For instance, a debt management program can stay on your credit report and change your credit scores for several years. That damage will only fix itself when you pay what you owe, so be careful when a credit counsellor suggests a DMP.  

How can I find a credit counsellor?

You can find nonprofit and for-profit credit counsellors all over Canada. Just make sure to do research before giving out any information. Your credit counsellor should be highly qualified and work for a reputable business, whether you pay for their services or not.  

Do I have to qualify for credit counselling services?

Every agency has its own rules, but the only real requirement for credit counselling is that you must be at least the age of majority in your province or territory (18 – 19+). Credit counselling isn’t just for debt. It can also give you some much needed advice.    

Will using credit counselling services stop creditors from harassing me?

Once you enter credit and debt counselling, your creditors may be told to speak with your counsellor, instead of yourself. That said, creditors aren’t legally obligated to cease their debt collection efforts unless it’s during a consumer proposal or bankruptcy. If a creditor attempts to contact you, don’t panic. Simply refer them back to your counsellor.

How long does it usually take to be debt-free when using credit counselling services?

This depends on who you are, how much debt you have and which credit counsellor you choose. For example, if you enter a debt management program, you may need to make payments toward your creditors for up to 5 years. However, declaring bankruptcy can totally discharge you from your debts in as little as 9 months (under the right conditions).   

Final Thoughts

Credit and debt counselling can be an incredibly helpful service in breaking free from the grips of debt. While you can, of course, escape debt without it, working with a trained and qualified professional makes it a lot easier. All in all, there are many ways these agencies can help you, by offering solutions that you simply wouldn’t be able to find if you tried to tackle your debt on your own. However, you still have to put in the work, it’s up to you to truly break the cycle of debt.

Bryan Daly avatar on Loans Canada
Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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