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Debt Counsellors vs. Credit Counsellors vs. Financial Advisors

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Debt Counsellors vs. Credit Counsellors vs. Financial Advisors

When you hear “debt counsellor”, “credit counsellor”, or “financial advisor”, they may all sound like the same type of professional. They are not. All three provide very different services from one and other and it’s important that you know the differences so that you don’t make the wrong financial choices.

Debt Counselling is an industry that has emerged in the past 5 years as a direct result of the public’s cries for help during the recent recession. Going directly to a trustee in bankruptcy is the same as negotiating with your creditors. In essence they represent your creditors so when they interpret your financial information, it often won’t be in your favour.

Debt counsellors understand bankruptcy and consumer proposals, only they are hired by you to structure your financial information before you meet with a trustee. The problem is that debt counsellors’ services are linear and are often the only choice. That choice is a bankruptcy or consumer proposal.

Credit counsellors are different. “Credit Counselling companies” services do not fall within the literal definition of credit counselling. Credit counselling companies offer a single service, which is a credit counselling program. In a credit counselling program your creditors agree to freeze the interest on your accounts at which point you make a single payment to the credit counselling agency that they then disperse to your creditors each month.

Credit counselling programs have a devastating impact upon your credit (as damaging as a bankruptcy or consumer proposal). Given the impact upon your credit and the fact that it only freezes your interest, a consumer proposal would be a better option than credit counselling. A credit counselling program often only makes sense if the individuals’ debt is less than $8,000.00. If you approach a credit counselling agency for budget help and financial counselling and not for a credit counselling program, they will offer you little to nothing in the form of meaningful help.

Financial Advisors work for companies that offer a wide range of financial services. Financial advisors are hired by you to help you achieve your financial goals. Financial advisors can help you work through your budget and finances to find ways to get out of debt and increase cash flow. Some Financial Advisors offer debt counselling services and can provide you with access to Federal Government Programs that include bankruptcy and consumer proposals.

Financial advisors are different because they understand not just debt settlement and bankruptcy but also mortgage financing, credit products, insurance products, investment products, credit, regulatory bodies and more. A “financial advisor” is not a genuine financial advisor if they offer the financial product that they are recommending as a solution to your debt problem. A financial advisor is hired by you (paid by you) to help you make effective financial choices that propel you out of debt.

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