Finding The Right Consumer Credit Counseling Service For You

Consumer credit counseling is a process that involves offering education to consumers

about how to avoid incurring debts that cannot be repaid through establishing an effective Debt Management Plan and Budget. Credit counseling is usually less typified by functions of credit education or the psychology of spending habits. Rather, credit counseling establishes a planned method of debt relief, typically through a Debt Management Plan. Credit counseling often involves negotiating with creditors to establish a debt management plan (DMP) for a consumer. A DMP may help the debtor repay his or her debt by working out a repayment plan with the creditor. DMPs, set up by credit counselors, usually offer reduced payments, fees and interest rates to the client. Credit counselors refer to the terms dictated by the creditors to determine payments or interest reductions offered to consumers in a debt management plan. It is important to note that consumer credit counselling agencies typically receive most of their compensations from the creditors to whom the debt payments are distributed. This funding relationship has led many to believe that credit counseling agencies are merely a collections wing of the creditors.

As the financial crisis hit, and due to lack of solid financial education for most people, many people are feeling distressed financially. The need to take financial control of their own life is not a luxury option for many people anymore. Out of all borrowings, credit cards are often one of the most costly financial sources, as it is a non secured loan. The interest rates of credit cards vary from bank to bank and pretty much depends on the credit ratings of the borrower. What may be important to note is that credit and debt counseling may sometimes fail. When people are overwhelmed by debt but don't want to file for bankruptcy, it is typically recommended that they make two appointments: One with a legitimate credit counselor, preferably affiliated with the National Foundation for Credit Counseling, and two with a bankruptcy attorney. The reason the second recommendation is made is that credit counselors and their debt-management plans, which are designed to pay off credit card debt over five years or so, are geared to steer people away from bankruptcy. Consulting with a bankruptcy attorney can help ensure that those struggling with debt know all their options. The other, even more important reason would be, that one may not even know, if you desperately want credit counseling to work. The bigger reason would be that budgets and reality collide, making it harder to bite on decisions that have a direct impact on your lifestyle and spending habits, which may be hard to break. Debtors would be expected to abide by a budget that is set by the Bankruptcy Code. Unfortunately most debtors simply cannot live under such a strict budget.

Free credits counselling services have helped thousands of people get out of debt and achieve financial health. These companies provide a plethora of services geared to effective debt settlement and consolidation. They often offer classes on budgeting and sound money management as well. If you have found yourself over your head in debt, there is help available. If you want to know how to get out of debt, you can find a company that specializes in these services. Most classes in school do not teach you how to avoid the debt trap or dig your way out once you have gotten in over your head. However, this is precisely what credit counseling services do. They help you consolidate your debt into a single affordable monthly payment. They can then show you how to avoid the credit pitfall in the future by instilling some responsible money management practices. Most debt elimination agencies will focus first on the current debt problem. They would most likely, work with your creditors to lower interest rates and even outstanding balances so you can save money on your payoffs. Then they may put all of your outstanding debt into a single monthly payment that is easier to manage. Most companies will also advise you to cut up the credit cards that got you into trouble in the first place so you don't continue to accrue debt even as you are paying off current obligations. This is probably the first step in responsible money management.

by: Ask Bill

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