What is a Credit Counsellor?
Credit counselling is often a very effective method that is being used to assist client debtors with debt consolidation through counselling, financial planning and the application of a wide range of useful tools with the intention to reduce debt and ultimately achieve debt elimination. In North America, there are many non-profit agencies and organizations that provide credit counselling free of charge or for a minimal fee. They can also refer potential clients to reputable credit counselling agencies that can be used if a debt counselling program does not work. These non-profit agencies strive to ensure that they only counsel clients with people who are in real need of credit counsellor services. The services of a credit counsellor can benefit a client in many ways; such as, obtaining debt relief, implementing strategies to improve their credit rating, negotiating with creditors and learning important money and debt management skills. When choosing an agency or organization to use for credit counsellor services, clients should make sure that the organization or agency is registered with the Canadian Law Association, is regulated by an Industry Council of Tangible Assets (ICTA) and that they provide proof of accreditation with a specialized Better Business Bureau.
One of the most popular services provided by credit counsellors is debt consolidation loan. The most common reason for seeking a debt consolidation loan is when a client finds that they have an unreasonable high interest rate on their current debts and they cannot keep up with repayments. As well, when a person has a bad credit score it can make qualifying for a mortgage difficult. Therefore, a credit counsellor can help clients apply for a debt consolidation loan in order to lower their interest rate and monthly repayments while ensuring that the client maintains a good credit score.
Another service provided by a credit counsellor is obtaining a National Consumer Debt Clearing Certificate (NCDC). An NDC is an identification document issued by the Canadian authorities that proves that a consumer has an income from a stable financial source and is capable of meeting the monthly repayment obligations for an agreed upon amount. Once the applicant receives an NCDC, he or she will be able to apply for a clear debt counselling from a debt counselling company. Once the application has been approved, a letter of clearance will be sent to the lender who will then begin the debt counselling process.
When applying for a clear debt counselling and request for a National Consumer Debt Clearing Certificate, the following information is required: the name, birth date, social security number and current address. All of this information is kept secure with a privacy notice placed on each document. After obtaining all of the necessary information the credit counsellor will create a customised personalized hardship letter. This is a letter that outlines the debts, the reasons why the consumer is in financial distress and how they will be addressed. The hardship letter is the initial part in the debt counselling process and it is important that this letter is properly worded and prepared. A well written and professionally prepared hardship letter can have a positive impact on the overall application process.
Another requirement of the NCDC is to ensure that all debts and commitments are listed and accounted for. It is important that every credit agreement is reviewed and any errors are brought to the attention of the counsellor. Once all of the information has been submitted and reviewed, the counsellor will make a final report for approval. If all three conditions of the NCDC are met the applicant will receive a completed debt counselling and review process. If one or more of the conditions are not met, the applicant will receive a negative mark and a pre-emptive rejection letter.
To be accepted into the scheme, consumers must ensure that their personal financial situation meets the guidelines set by the national credit regulator. In order to do this the applicant must meet specific income guidelines. These guidelines have been carefully calculated in order to ensure that eligible consumers will receive fair and competitive rates. As well, the majority of debt counsellors will only accept applications from individuals who can clearly demonstrate an ability to repay the loan. Individuals who have documentation or proof that they cannot pay off the loan will most often be rejected by debt counsellors.
There are several different types of debt counsellor available. There are both profit and non-profit debt counsellors that require fees for services provided. Some companies also require consumers to sign a contract before being accepted into the scheme. Non-profit debt counsellors are regulated by the Canadian Association of Professional Debt Counsellors (CAFD) and are required to follow strict regulations. For profit debt counsellors are generally regulated by the Royal Bank of Canada (RBC). This information can be found on the RBC website.
Once a person signs up with a debt counsellor they will still need to manage their debts and monitor their progress. This is because it is not uncommon for debt counsellors to recommend that a client cut back on their spending habits to ensure that they don’t fall into the same trap again. Consumers can also request to eliminate their credit card debts completely. However, this is usually only possible if the consumer has sufficient income to cover the monthly payments. Many consumers do choose to reduce their credit card debts and choose to avoid bankruptcy altogether.