Why Credit Counselling Works For Us

Next month marks our first month in credit counselling (CCS). While not for every situation, it was our only real option. We chose to go with a local not-for profit agency and couldn’t be happier.

As I explained, we have a huge amount of credit card debt primarily because of my school (tuition etc), not that it matters how we ended up there, the fact remains we have about $23,000 in unsecured debt (not including my student loans, LOC’s or mortgage).

Here’s a breakdown of the debt we will be consolidating:

TYPE

BALANCE

MINIMUM MONTHLY PAYMENT

DMP PAYMENT

CREDIT CARD

8200

240.00

151.00

CREDIT CARD

5800

115.00

107.00

CREDIT CARD

1200

55.00

19.00

CREDIT CARD

2000

60.00

37.00

LINE OF CREDIT

5000

152.00

92.00

OVERDRAFT

500

9.00

TOTAL

$22,700

$622.00

$415.00

$622.00/ month in MINIMUM payments. Going NO WHERE.

Other student loan and LOC payments being about $660.00/month

Then we have mortgage,car loan, insurances, living expenses etc etc…

Needless to say with minimum payments at $622.00/month, an additional $660.00 in student debt payments/month, a $1300 mortgage payment every month…we have very little money at the end of the month to put towards actually paying the debt down. I will break our monthly budget down later but the fact is, we were bound to be in credit card debt for like 50 years.

We approached two banks about consolidation loans but were denied. We have too much credit in our names. They both came back and said we were doing well under our current financial situation (not missing payments etc) but that they couldn’t offer us  the loan. This does not make sense to me, well it does but com’on banks! We’re not asking for MORE credit we’re asking that you transfer and closeout the above mentioned creditors for your lower interest consolidation loan so we can actually get somewhere with payments!

Excuse the language but it pisses me off. Banks have no problem offering you the money in the first place but want nothing to do with you if you need help from them down the road.

In comes credit counselling. The$415.00/month goes directly on our principle balances. No more interest payments and the CCS takes care of everything for us. We give them our money and  they deal with all the creditors, huge relief.

We’re now on the right path. This works for us. The estimated repayment is 55 months but our goal is no longer than 36months. We’re planning to contribute more than required every month+income tax returns+extra pay months (we’re paid biweekly). I have it mapped out in my head but need to get it on paper to confirm we can do this but I think it’s possible.

With credit counselling our credit is tarnished (but not to the extent of bankruptcy). CCS is time in the program/repayment+2 years, so the faster we pay it off the faster those 2 lingering years can start then we’re all fresh and have restarted our credit rating.

Things are looking up for us. I’m sort of excited to be embarking on this!

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5 thoughts on “Why Credit Counselling Works For Us

  1. Congrats on making arrangements to pay off your credit. I know how overwhelming that feels every month and I agree with what you said about the banks.

    In Alberta we have a relatively new organization (non-profit) called moneymentors and if you go to them and sign up they will lump together all of your unsecured debt and propose to your creditors to pay it all back over 4 or 5 years but at a 5% interest rate. Of course your credit rating is tarnished as well and you have to be able to afford the monthly lump sum payment for as long as it takes.

    • Sounds pretty similar to this program. They offer money/budget management and consolidation (at 0%). The way I see it, our credit isn’t going to be good nor could we apply for any if we needed in our current situation so why not deal with the tarnishing to restart? It’s not totally gone, we’re still calculating good credit with our cell phones and one credit card for hubby’s work usage (plus mortgage and car payments).

    • In Alberta (actually in all provinces from BC to ON) there is another non-profit organization called the Credit Counselling Society that offers Debt Management Programs as well. The interest mostly goes down to 0% (all major banks) or very close, depending on the creditor. You can also pay your debt back over 6 months to 5 years! Just an FYI 🙂 Lots of money and debt education workshops and webinars too, all for free!

    • Yup, an average of about an extra 200/month. The extra $150-200/month is how we plan on paying the term off in 36mos vs the 54. I haven’t finalized whether we’ll do the 150-200/month or if we’ll do it in larger lump sums on our extra pay months (we’re paid bi-weekly) but either way we’d like to get off the program in 36 months.

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