Credit Counseling - A Way To Become Debt Free

Credit Counseling - A Way To Become Debt Free

Living paycheck to paycheck? Being harassed by debt collectors? Can't make ends meet? If this sounds familiar, you must consider availingdebt consolidation,debt settlement or credit counseling. Amongst thesedebt solutions, credit counseling is the most sought after one. Credit counseling is a professional counseling that not only offers financial education to consumers but also try to work out a payment plan based on their income.

The counseling agencies examine your current financial situation. Given below are the factors that are taken into consideration while assessing your financial status:

Number of accounts

Minimum payment on each account

Balance due

Any past due account

Monthly income

After taking into account these factors, the agency chalks out a realisticdebt management plan (DMP) that will help you in paying off your debts. The proposed plan is then sent to each of your creditors for their consent. Once the set up plan gets approved by your creditors, you start making payments to the agency. Then the agency distributes payment to each of your creditors.

The DMP set up for you by the agency usually has the following features: reduced debt repayments, waived off fees and interest rates. Once you pay off your accounts through a debt management plan the creditors will close your accounts and restrict the accounts to future charges.

To make your DMP successful you must make regular, on-time payments. It usually takes 48 months or sometimes even longer to complete a plan. It is suggested that before getting enrolled in a DMP you must ask the agency to give you an estimation of the time required to complete the plan.

The most common advantage of a DMP is the consolidation of different monthly payments into one monthly payment. Thus you have to make only one payment at the end of each month to your counseling agency. A single monthly payment makes your budgeting much simpler, and it also makes your life a bit less stressful as you can stop worrying about dealing with multiple creditors. The benefit of consolidating monthly payment is that the amount you shell out at the end of each month is usually less than the sum of the individual payments you had to give if you were paying off the accounts on your own.

Another benefit of getting enrolled in a DMP is your delinquent accounts become current. This process is often known as "reaging" or "curing" an account. This usually happens after you make a series of timely payments to your creditors through the DMP and prove them your commitment towards the completion of the program.

Seeking help from a credit counseling agency is an efficient way to pay off your debts. However, you must remain careful while zeroing in on an agency. There are many credit counseling organizations that are nothing but are fly by night outfits. They charge fat upfront fees and then disappear with your money. Hence, it is advisable to do a proper research work, check the counseling agency with your state Attorney General's office, local consumer protection agency, and Better Business Bureau (BBB). From these places you can get an idea whether consumers have filed any complaints against them or not.

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