There's almost nothing worse than drowning under a mountain of debt, but many Canadians have maxed out credit cards, tapped out lines of credit and a growing pile of unpaid bills. 



Eventually, many debt-addicted consumers will have only two options: file for bankruptcy or talk to a credit counsellor. In some ways, credit counsellors are like Alcoholics Anonymous sponsors. They help you make smart and sober decisions and work with you to get clean from debt. 



Here are five ways credit counselling can help you pay down debt and create financial security for your future.



1. Review your spending

One of the first things a credit counsellor will do is tally up all your bills and review your credit card statements to get an idea of where you spend money. They want to see exactly where every dollar is going. That way, they can help you figure out where you should really be spending your money and devise a plan that will help you pay down debt. 



2. Develop a financial plan

After going through your expenses, the credit counsellor will help you create a financial plan. They'll write down how much you should spend on everything from groceries to home repairs. Don't expect much money -- if any -- to go towards a night out at a nice restaurant. This may seem harsh but if you're drowning in debt, you must be prepared to make some sacrifices in order to get yourself back on solid financial footing.



3. Cut up your credit cards

On your first visit, there's a good chance your credit counsellor will cut up your credit cards. The only way to pay down your enormous debt is to get rid of the thing that makes spending easy. It's tough to watch, but you'll thank them for it later. Don't expect to get a new credit card until you're back in the black. 


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4. Stop interest from accumulating

The big benefit of a credit counselling service is that they work with the financial institutions to help you repay your debt.

In many cases, they can completely stop interest from accumulating or at least get the rate down to near zero. That's not something you can do yourself.



5. Debt repayment plan

Once your financial plan is in place, your credit cards are cut up and your interest rate is lowered, you and your credit counsellor will figure out how you're going to pay back your debts.

Based on your expenses and how much you owe, you'll have to pay a certain amount to the credit counselling agency each month. The agency will then take that money and pay back your creditors. 



For many Canadians, credit counselling is the ticket to a no-debt life. Make sure you use a reputable organization, though. Credit Counselling Canada and Credit Canada Debt Solutions are the two main organizations here in Canada. Work with them to get your credit cards and other debt under control and chances are you'll be debt-free in no time.

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