What are the services of a credit counsellor and what will it cost

If you’re in the middle of a cash crunch, a credit counsellor can help give you an objective assessment of your financial situation. But what will it cost?

Most credit counselling agencies charge fees for their services, which can greatly vary between agencies.

The most common service offered by a credit counselling agency is a called a debt management program (DMP). A DMP is designed to help you pay off your unsecured debt (debt that isn't secured by your mortgage or car). That means a debt management program can help you manage your credit card debt, a line of credit or a private loan.

Once you are enrolled in a debt management program, a credit counsellor will contact the companies you are in debt with (called your creditors), and ask for their cooperation in putting your plan into action. Sometimes that means your creditors will lower your interest rate and/or fees on your debt.

To setup a debt management program, you will normally need to sign a contract with a credit counselling agency and agree to pay a one-time setup fee and a monthly administration fee. These fees depend on the agency, but all members of Credit Counselling Canada will waive any fees in the event you’re not able to pay them.

It is important to know that once you are on a debt management program, there will be a note on your credit report that you are making regular payments to creditors through a special arrangement with your credit counsellor. During this time, you will not have access to any additional credit.

Once you have completed your debt management program, you will have access to credit again but your credit report will still have that note. That means for a few years after you've completed your DMP, anyone who accesses your credit report (such as your landlord, employer, or creditors) will see this information.

Sometimes there is no other option but to file for bankruptcy. But bankruptcy isn't free. It can include costs such as a minimum monthly contribution toward the administrative charges of the bankruptcy, a surplus income payment, and any money you lost through non-exempt assets (i.e. investments, tax refunds and home equity).

If you've considered your options and you think you could benefit from the services of a credit counselling agency, do your research and find a reputable organization and a qualified counsellor. Look for an agency that is a recognized member and in good standing with a provincial or national association such as Credit Counselling Canada, the Canadian Association of Credit Counselling Services or the Ontario Association of Credit Counselling Services.

The cost of credit counselling can seem expensive, but a reputable agency and credit counsellor can help you save money on interest and get you back on track financially.