Does Credit Counseling Work?

You may have heard the term “credit counseling” at some point, but you may not know exactly what it is. Credit counseling is service for those with credit card debt that helps people to learn how to manage their money in a responsible manner and to help them become debt free. When a person enrolls in a credit counseling service they are required to meet with or speak to a credit counselor. The credit counselor will then ask you to provide a list of all of your credit cards, account numbers and the total amount of money owed to each card company. From there, the credit counselor will then ask you to provide your total monthly income and a list of all of your monthly expenses that you must pay in order to survive.

Once a credit counselor has all of this information he then calculates your finances and shows you how to best pay off your credit card debt, where your money is actually going each month and how you can make better financial decisions in the future. Then, a credit counselor will offer you the chance to enroll in debt management plan that will have you paying one large payment to them each month that they will then disperse to your credit card companies. Typically, your debt must be paid off in full within 60 months. The credit counselor will negotiate with your credit card companies to get you lower interest rates, waive your late fees and even lower your monthly payments so that your total payment is less and more affordable.

Now, does this work? Yes. For the most part, those that enroll in a debt management plan with a debt counseling agency are able to pay off their debt in five or less years because the agency is able to help them financially. With lower payments and negotiated rates, your payments are less and therefore easier to pay. In addition, you are making one large lump sum payment each month to a debt company who is paying your credit card bills for you from those funds. Your payments are made on time and in full and your debt is gradually reduced. However, simply contacting a credit counseling service will not always work. Unless you enroll in their debt management plan, you will not likely be able to manage your debt on your own. The benefits of a debt management plan are what make reducing debt easier and more manageable.

How Credit Counseling Services Work

For those who are deeply in debt, a credit counseling service might be exactly what you need to escape your problem. Credit counselors will work with your creditors to come up with a plan that will get them off your back and allow you to live a stress free life again. Here is how the process works.

Meet With A Credit Counselor To Determine Eligibility

 

The first thing you need to do is to meet with a credit counselor to see if you can actually benefit from credit counseling services. This person will go through all of your debts and make sure that you will save enough money to benefit after you pay fees and other charges that might arise. This is also a good time to ask questions about the company and their track record. It is always a good idea to check out a company with the BBB before making a decision.

Establish A Plan Of Action

After you have determined that credit counseling is for you, it is time to make a plan that you will follow to get out of debt. What usually happens is that your interest rate and balance is slashed on your debts and you make a single payment a month. A true debt consolidation may occur or you might send in one payment that is spread out among the different creditors by the counseling service.

Follow Through

Most debt plans are going to take about 60 months to complete on average. This means you have to stick to the plan and follow through with it. Do not take on any more debt as this will simply make the situation worse for you and you will not see the benefit. Your creditors will not be happy if you drop out of the program and you might have to face legal actions and other measures again.


Going through credit counseling is a great way to get out of debt and be done with it for good. Make sure that you are able to follow through with the plan that you have established for yourself. Credit counseling is no good if you cannot stick to the plan, or if it is going to be too expensive for you to actually complete. Remember that you should never go with a company that does not have your best interests in mind from the time you walk in.

Using a Credit Counseling Service to Eradicate Debt

Thanks to a weak economy, more people are struggling from the challenges of debt than ever. Whether it is from a job loss or higher expenses, many families have been forced to borrow money, often from their credit cards with high interest rates, in order to pay the monthly bills.

Unfortunately this short-term fix can quickly spiral out of control as interest payments consume more and more of your paycheck. Before you know it, you will have dug yourself into a huge financial hole and have no idea how to get out of it.

It is at times like these that credit counseling services can come to the rescue by helping your reverse your debt problems. These companies have experts on staffs who have worked with thousands of people in similar circumstances, and they have the experience to provide you with a detailed plan in order to reach a more secure financial future.

Many of the things that a credit counseling service does are simple things that any financially-savvy individual could do by themselves like creating a realistic budget and debt repayment plan. However much of the value from creditcounseling services comes from the fact that these firms will hold you accountable for your financial decisions. Just like with dieting, where it is often useful to have a trainer or nutritionist track your progress, a credit counselor can ensure that you are making progress towards your financial goals.

However, before you make any decisions about a credit counseling service, it is important to do your research in order to find a reputable company that will have your best interests at heart; otherwise, you may find yourself in a worse situation than before you started. 

The vast majority of credit counselors will be certified by the state in which you live; you should be skeptical of any adviser that has no financial credentials at all. In addition, they should be willing to provide you with plenty of free information about their services and a complete breakdown of their fees. As well, you should expect to have at least one complementary meeting with a counselor so that you can have all of your questions answered. 

Your current debt situation may seem overwhelming, but there are many reputable agencies that are more than able to help you through your crisis. Not only can they provide you with much valuable information, they may also be able to renegotiate some of your debt in order to make the repayment more manageable. However you will need to take the first step by contacting a certified credit counseling agency that you have researched thoroughly. By doing this, you will give yourself the best opportunity to eventually eliminate your debts.