image description

What Is a Credit Counsellor, and How Can They Help You?

This article explores the role of a credit counselor




What Is a Credit Counsellor, and How Can They Help You?

A credit counsellor is just like it sounds. A credit counsellor is a financial professional that will help you to become financially stable if you have unmanageable debt. It is a credit counsellor's job to advise you on your finances so that you can create a plan of action to better budget and pay off any outstanding debt. 

What a Credit Counsellor Does

At the most basic level, a credit counsellor is responsible for:

  • Reviewing your budget
  • Creating a financial plan
  • Understanding all consumer debt and credit laws
  • Negotiating with credit card companies on outstanding debt

A credit counsellor will most often work in a local office or provide their guidance via the telephone or the Internet. It's preferable to work with a credit counselling organization that provides in-office counselling services. A credit counsellor should have a solid financial education, either in social services, accounting, or both. They will most often have a financial degree in a field like accounting.

A credit counsellor should also be registered through the Australian Financial Counselling and Credit Reform Association. Before considering any credit counsellor, make sure to check their credentials thoroughly. Working with a credit counsellor requires the utmost security since they will be dealing with your personal finances.

Credit Counsellor Benefits

For many people, credit counselling is often beneficial in comparison to debt consolidation; a credit counsellor can help provide a long-term budget and financial plan. If a financial plan is not created from the get-go, then no amount of debt consolidation will be able to completely ease the burden of debt. Many people who are able to successfully pay off a large amount of debt soon end up in debt again if they do not create a clear financial strategy and budget for the future.

At the most basic level, a credit counsellor will provide you with the benefit of teaching money management skills. You will learn how to:

  • Control spending
  • Budget
  • Set and reach financial goals

Still, an even more important benefit of working with a credit counsellor is that you can establish long-term financial security for you and your family. You will finally be able to save up for and buy your own home if you are not yet a homeowner. For many families, credit counselling enables them to create a financial strategy to save money for their children's college funds. Credit counselling can also be used to create a plan for retirement to save a sizable nest egg for investment and pension.

A credit counsellor can also teach you:

  • How to best use credit cards.
  • How to deal with financial stress and pressure.
  • How to calculate your debt to income ratio.
  • How to manage your personal finances.
  • How to find the best debt relief option for your specific financial situation.
  • How to create a customized debt management program to pay off all creditors.

For many people, the use of a credit counsellor will help stop problems before they start. You can avoid irreparably damaging your credit due to delinquencies and unpaid surmounting debt. A credit counsellor will work on your behalf to negotiate directly with your creditors.

Most creditors will appreciate the communication and effort taken to pay off debt using professional help. These creditors will be more likely to negotiate on lowering interest rates and eliminating late fees so that you can pay off debt and avoid damaging your credit score. 

Your Debt Management Plan

After assessing your financial state, a credit counsellor will propose a debt management plan to help you set and achieve financial goals. You will learn how to manage your credit wisely and spend your money effectively each month.

A debt management plan is personalized and tailored to your specific debts in order to arrange a favourable payment plan with all creditors. You don't have to work with a credit counsellor to set up a debt management plan, but for many people, a credit counsellor can help to provide structure through budgetary counselling.

In a traditional debt management plan, a credit counselling company will negotiate with creditors to lower monthly interest rates. This means that all money spent to repay debt each month will go further since it will not be wasted on unnecessary interest charges. This negotiation will enable more money to be spent on paying the principal balance of a debt.

Most people benefit from credit counselling in order to pay off high interest rate credit cards, which are the most difficult to manage. If you're unable to make a payment or are late, interest rates on credit cards will only continue to increase and compound on your existing debt. A basic debt management plan will work to cut down on all interest rates to provide you with more freedom to pay off the balance of your debt.

Debts eligible for a debt management plan include:

  • Credits Cards
  • Department Store Credit Cards
  • Unsecured Personal Loans
  • Some Medical Credit Accounts

 

In most cases, cell phone bills, utility bills, medical bills, bank overdraft protection bills, car loans, and home mortgages are ineligible for this service.