Being in debt is a common scenario and something you ought not to be shy about. Acquiring a loan is actually not a problem, the real problem lies in repaying the loan, and unfortunately, most of us struggle in this area. If you always find yourself constantly struggling with debts, credit counseling is the solution to your debt problem.
Credit counseling can help manage your debts and repay them fast. This tactic is all about repaying your debt with the assistance of a credit counseling agency. It is the duty of this agency to review your debt profile, including your finances, and then come up with a plan that helps repay your debts in time.
Credit counseling has helped lots of people get out of debt. This debt relief strategy isn’t complicated, and if adopted, can assist you in repaying those troubling debts of yours. Imagine the feeling of settling all your debt earlier than expected? Yes, it is possible with credit counseling.
How to Get Out of Debt With Credit Counseling?
Organizations that offer credit debt counseling can assist you in several ways. First off, this agency enrolls you in group classes. They can also provide you with valuable information on several financial subjects, like how to create and adopt a budget or how to get out of debt fast and save money.
Credit counseling is a scheme that helps debtors manage their debts and finances. The main aim of credit counseling is to help a debtor prevent bankruptcy and provide them with advice on how to manage their money.
A credit counselor can see you privately to review your financial situation and offer you advice or recommendations. They can also help you create a debt management plan. A debt management plan is simply an agreement with your creditor to repay what you owe them by making a single consolidated monthly payment via the credit counseling organization.
Should You Consider Credit Counseling?
For several individuals, the first step to getting out of debt is by summing it up. After determining the total debt they owe and to whom, they become engulfed like a stray dog in headlights, but with an empty wallet. If you add your debts and realize that you are in that situation, you can turn to a credit counseling agency.
Credit counseling is a good way to get rid of your debts. This tactic can help you not just repay your debts, but manage your finances as well. If you dream of a debt-free life even after settling your debt, consider credit counseling.
A good credit counseling agency can offer you the best advice on managing your money and debts; they can help you create a budget and teach you how to stick to it; they can also provide you with free educational materials, including workshops. Another thing you should know about these agencies is that most of them are non-profit agencies. This doesn’t denote that they offer free services. In fact, some credit counseling agencies charge exorbitant rates for their services. For this reason, ensure you do your homework when selecting a credit counseling agency.
Who is Credit Counseling Good For?
Debts, especially those that seem so hard to repay, can affect our lives in many ways. Credit counseling may be an effective way to get rid of your debts, but one thing you should know is that not all debts can be paid using a debt management plan.
Credit counseling is for individuals with little unsecured debts, like personal loans, small unpaid credit card balance, or other types of unpaid bills. Looking to settle secured debts like mortgage, student loans, car loans, with credit counseling may be impossible.
Does Working with a Credit Counseling Agency Have any Effect on Your Credit Score?
People are always careful not to engage in anything that’ll affect their credit score, as it could damage their chances of acquiring a loan. As you know, your credit score and payment history are two things most lenders consider before offering you a loan.
If you just consult a credit counseling agency for advice, your credit score wouldn’t be affected. But if peradventure you enroll in a debt management plan, your credit score will reduce a little, but it won’t stay that way for long.
Usually, lenders often want to be sure of your creditworthiness before they offer you a loan. A bad credit score will prove that you aren’t creditworthy. So, do you think credit counseling will affect your credit score?
Your credit report will simply state that you are repaying your debt through a credit counseling agency for the period of your payment plan, including for two years after you must have settled all your debts. This simply denotes that borrowing money during that period may be difficult. But if you were already struggling to make payments, your credit rate probably wasn’t palatable to start with, and paying your debts before the due date is the best way to repair the damage.
What is the Cost of Credit Counseling?
You’ve finally decided to give credit counseling a try, but you aren’t aware of the cost. Some credit counseling agencies offer pro Bono services, while others don’t charge much for their service. Because you are in debt and can’t afford to splash the cash, ensure you go for a credit counseling agency that suits your budget, possibly one that is cheap and capable of offering you the best help you need to get out of debt and fix your credit.
Credit counseling fees vary for each credit counseling agency. There isn’t a fixed price. Some are non-profit, like local credit counseling societies that charge based on your pocket, while some are commercial businesses.
Before accepting to hire or work with a certain credit counseling agency, ensure you make inquiries regarding the cost of their services like:
- Monthly maintenance or membership fees
- The cost of application
- Initiation cost
- Individual fees for each creditor
If the fees are too much for you, shop around for other agencies that offer the services at a lower price. One thing you should have in mind when shopping around is that some credit counseling agencies may obtain a percentage from any debt they reclaim and thus may have a financial interest in you choosing a debt management plan.
Advantages of Credit Counseling:
With the assistance of credit counseling, you can repay your debts in no time. A competent credit counselor can also offer you valuable advice on preventing errors that could lead to debt in the future.
Below are some primary advantages of credit counseling:
- Can help you prevent bankruptcy including its terrible consequences
- Credit counseling is pro Bono
- Credit counseling helps create a plan that manages your debts. This plan merges your bills into one monthly payment at a reduced interest rate than what you were paying. A debt management plan can repay your debt in three to five years.
- With credit counseling, you can learn how to make budgets and adhere to them. You will also have an in-depth knowledge of what a good debt and bad debt is, and this will guide you when making decisions that will restrict your use of credit in the future.
- Credit counseling can also help you repair your credit score if it has been damaged due to debt mismanagement.
- You might have the opportunity to create your debt management plan after counseling, preventing administrative fees. To achieve this, you will need to speak to your creditors.
Based on research by Professor Moulton, debt among people that adopted credit counseling dropped significantly compared to individuals who weren’t counseled. Based on her study, counseling altered the behavior of partakers who had difficulty in managing their money.
Disadvantages of Credit Counseling:
Partaking in a credit counseling exercise wouldn’t cost you anything other than about 30 minutes of your time. What you should know about this exercise is that these agencies are hoping that you are eligible for their debt management scheme. This scheme has its advantages and disadvantages. Below are some of its disadvantages.
- Several people fail to stick to the plan. A debt management plan and a budget will only work if you are committed to it. Yet almost half of the population who partake in this plan drop out, and just a little percent of those in search of credit counseling partake in debt management.
- While the debt management plan is on, you may find it difficult to obtain new loans.
- It might be ineffective for you. Your credit counseling agency will try to consolidate your debt into a debt with low-interest rate and monthly payment. Still, sometimes, they fail to convince creditors to consider the plan. If such happens, you will have no choice but to stick with the high-interest debt you were paying earlier.
- You will need to make on-time payments. If you make late payments, you default in your payment, or you decide to leave the program, the privileges you enjoyed will be terminated, and you will be reported to credit-rating agencies who will take necessary actions, ones you wouldn’t like.
Conclusion:
Aside from consulting debt counseling agencies, there are other debt-relief options. Some debtors seek professional help to repay their debts. This help comes in the form of programs created to help debtors like you repay their debts and live a life free from the shackles of debt.
