What Is Credit Counseling?
If you are drowning in debt, you may already have heard about the possibility of credit counseling, yet you may not really know what it’s all about. Credit counseling often falls under the same umbrella as debt settlement or debt negotiation, but it’s actually a totally different beast. With counseling, a credit counselor will look at your situation and help you figure out a way to lower your monthly payments to a manageable amount.
If you are regularly taking calls from bill collectors, or have some of your debts in the hands of a collection agency, you may be a candidate for credit counseling. If you are indeed in that situation and are looking for some professional financial help, read on to learn how best to proceed with a credit counseling company.
Are All Credit Counseling Companies The Same?
A big part of the problem here is that not all credit counseling companies are totally above board. There are plenty of scam companies out there, most of whom claim they can essentially fix your credit report overnight. This is not a quick fix situation, which is why you need to look for a company that has been accredited by Consumer Credit Counseling Services.
Meet with a credit counselor
The next step in the process is arranging a meeting with a professional credit counselor. Be prepared to bring all of your financial details with you, making sure to leave nothing out. The more information you can provide, the better chance you have of getting put on a payment schedule that works.
It’s at this point that the credit counselor takes over and goes to work on your behalf. They will get in contact with each of your creditors and explain how you are trying to put together a repayment plan for all of your debt. They will work with the creditor to reach a repayment plan that works for you. This is regularly done by having the interest decreased in order to make lower monthly payments.
You may find that your credit counseling company also offers a debt management system. What that means is that you submit a lump sum to the credit company and allow them to make the payments for you. While this may sound great, you need to be a little wary of this type of offer. There have been situations where the credit company has made the payments late, which in turn leads to the credit report of the client being negatively affected. It is always best to do a little due diligence on the company you choose before signing up for a debt management program.
Cost of the service
The question you have at this point is probably concerning how much this service costs. A reputable company will only take a small fee, usually in the region of around $14 per month. If they have their hand out for a large upfront payment, that’s a red flag that could be a sign of a scam.
Another thing to be aware of is that using a credit counseling company can hurt your credit report. You have to look at this in a positive light, though, as it looks a whole lot better if you can explain that you are trying to actually pay off your debt as opposed to just drifting into bankruptcy.