Consumer Credit Counseling
Consumer Credit Counseling Solutions and Help
Consumer Credit Counseling
When all your debts become difficult to manage and you need help negotiating with all your creditors, consumer credit counseling may be your best option. However, not all consumer credit counseling agencies can offer the right solution to your problem. You must understand your situation, and do your research to find the agency that is most suitable for you.
Introduction to Consumer Credit Counseling
Consumer credit counseling is a type of service that helps find a workable solution to financial problems. It is aimed to rebuild credit by designing a debt repayment plan that you can afford. It is not an overnight solution though, and will not raise your score instantly.
The service may be offered by universities, credit unions and local agencies for free. There are also private organizations that provide more comprehensive consumer credit counseling at a small fee. They offer advice on how to manage your money properly, and how to stick to your budget to avoid getting into the same situation again.
How Consumer Credit Counseling Works
If you will seek consumer credit counseling, you can expect to get these services:
- Financial evaluation– They will assess your financial condition to see how badly you are in debt. Here, you will need to provide information about all your debts, your monthly cash inflow, savings, and properties.
- Repayment plan– The credit counselor will develop a repayment plan based on the financial information provided. The credit counselor will then negotiate with your creditors to accept the proposed repayment plan. You may be asked to sign an agreement to pay the amount on time, and not to get new debts until your current obligations are settled.
- Credit counseling– The consumer credit counselor will help you learn about keeping your finances in order. He or she will also coach you into staying on target with your financial goals. He or she will also help you understand the costs associated with a bad credit score.
- Debt management– When all your debts far exceed your cash inflow, a debt management plan may be the only solution you have left. The agency will negotiate for lower monthly repayments with your creditors. You will pay the agency a lump sum every month which they will distribute to your creditors. Debt management however, can have negative effects on your credit score.
Benefits of Consumer Credit Counseling
When your debts get out of hand, it is often better to ask help from a professional. Credit counseling will help you understand how to deal with your finances better. It can also do the following:
- Avoid bankruptcy– You may not need to declare bankruptcy if you can sort things out with your creditors. Consumer credit counseling can help get your creditors to accept lower payments if you cannot afford to pay the regular amount. You know how badly filing for bankruptcy can affect your credit. This should only be an option when all else failed.
- Stop collection calls– Expect to get regular calls when delinquent accounts are sent to collection. Collectors will call you every day until you make a payment, or you agree to a payment plan. Once an arrangement is made by the credit counseling agency, collection calls will stop.
- Save thousands of dollars in interest payments– Unpaid bills accrue interest, and this will continue until your debts are settled. Consumer credit counseling can also ask the creditors to hold interest for a fixed period.
- Eliminate late fees and penalties– Apart from interest charges, consumer credit counseling can also ask to remove late fees and penalties from the computation. Your debts can double up in no time if these charges will not stop.
Choosing a Consumer Credit Counseling Agency
The non-profit status of consumer credit counseling is not a guarantee of legitimacy. You need to select carefully who you will entrust your money and credit with. Below are a few things to consider:
- Licensed and certified– The consumer credit counseling agency should be licensed by your state. They should also be a member in good standing of the National Foundation for Credit Counseling (NFCC), the Association of Independent Consumer Credit Counseling Agencies (AICCCA), and other third-party accreditation groups.
- Years of operation– The longer they have been in business, the more likely that they have the skills and resources to help you with your situation. To further assess the legitimacy of the agency, you can check with the Better Business Bureau (BBB) and the National Foundation for Credit Counseling (NFCC).
- Fees– Ask about their fees. If they offer the service for free, discuss possible expenses that you will need to pay for.If you enter a debt management plan, there are usually prices to pay such as initial set up fee, monthly maintenance fee, and upfront fee for each creditor. Prices may vary from one agency to another.
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