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The Difference Between Financial Consulting Companies and Debt Settlement Companies

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The Difference Between Financial Consulting Companies and Debt Settlement Companies

The number of debt settlement companies in Canada seems to have risen dramatically over the past five to 10 years. With more and more Canadians finding themselves struggling with debt, it’s a sign of the times that companies offering debt relief have increased in number. In this post, we’ll focus on what to look for when it comes to legitimate debt relief versus going to one of the many debt settlement companies out there.

Many people are signing up for debt settlement programs because of the way the companies almost guarantee an easy way out of debt problems. However, there are several problems with this option, especially when the debt settlement company you choose is not completely open and honest, or less than reputable. In this case, you could easily end up with more problems than you started with.

For years, warnings have been issued by consumer protection agencies and governments alike about the perils of working with these operators. Debt settlement companies claim to negotiate with creditors on behalf of consumers and arrange payment schedules or settlements. The typical debt settlement company’s solution involves you paying them money monthly (instead of your creditors) and then when they have enough they will endeavour to make a settlement with your creditors.

The problem is that many of these companies ask for money up front and you must pay fees to the companies for their services. Unfortunately, there have been many instances reported where consumers have paid into debt relief programs only to have the company disappear overnight – with their fees, but no results. Furthermore, putting off paying your creditors in exchange for paying these companies can severely damage your credit.

Some other alarming facts to consider about debt settlement companies:

  • They only have success rate on average no higher than 10%.
  • Fees paid can often be equal to or exceed the amount you owe.

Due to the rise of unscrupulous behaviour of several debt settlement companies, the federal government has posted a consumer alert that reminds consumers of the dangers of working with these organizations. You can read more about the federal government’s warning here: https://www.canada.ca/en/financial-consumer-agency/services/debt/debt-help/alert-debt-credit-repair.html

If you are in a financial pickle, your best choice is working with a professional debt consultant. They will work to protect your best interests when developing debt relief solutions. Here are four reasons to work with an independent financial professional:

  1. They provide impartial advice on a range of solutions.
  2. They do not charge up-front fees and will first propose a realistic plan that suits your specific needs.
  3. They can help with complex issues such as tax debt, or other financial situations that may involve enforcement action.
  4. Along with consulting services, they offer financial advice, such as budgeting and relief programs, to help you explore all your options to becoming debt-free.

Your financial situation is unique and different from everyone else’s situation. Hiring a good financial consultant or adviser who will work with you to develop a solution tailored to your circumstances is the best way to start on the path to fixing your finances.

At DebtCare, we put your needs first. Before you start calling debt settlement companies, call us today for a consultation at 1 (888) 890-0888.


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