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Credit Counseling

Can Credit Counseling Bring Down Consumer Debt?

The answer is a resounding yes- especially in cases where a person has not been able to create a budget and sticking to it. In the past few years, a number of people have discovered the joys of credit counseling and it has helped them identify a better spending plan that could help them pay their bills without unduly altering the lifestyle. Credit counseling helps these people pay off their bills in an affordable manner. Generally, these people ultimately pay less than those who go without this sort of counseling. If your bills seem to keep piling up and your debts suddenly seem unmanageable-a call to a non profit credit counseling centre may be just the solution you're looking for!

When you're working with a nationally certified counsellor, he will help you find the best option for yourself. They'll guide you on creating a workable budget, help you pay less in bills and frame a plan that will help you pay off your bills. Debt management plans (DMPs) are also offered by such credit counseling firms. A DMP is a specialised and affordable monthly payment plan that consolidates your debts and helps you repay it at reduced rates of interest. You get to pay off your bills and save quite a bit while doing it! If your debts seem overwhelming right now, you can get back in charge- with a free credit counseling session. They're free and you are under no obligation to sign up for a plan afterwards!

Common Questions:

How Much Could You Save Through A DMP?

Results vary from one person to the other of course, and Debt management planss may not be suitable for you right now. However, on an average, these are facts that are noted for an average Debt management plans:

  • On an average, a client's interest rates on his credit cards were brought down to 8% from about 22%. This saved him about$186 in interest payments each month during the first year. It gave them the space they needed to start saving money and repay the other bills.
  • If a typical client enrols with 5 accounts and an amount of $22100 in balance- he could save up to $5288 by paying reduced rates of interest.
  • Typically, a Debt management plans client would take about 42 months to finish a plan. Of course, a couple of candidates would finish earlier because they took advantage of a windfall gain- but it was not a norm.

A Basic Idea about Credit Counseling

Here's how it works:

  • Once you get in touch with a counseling agency, you'll be put through to an independent counsellor. He will help you analyse your financial situation thoroughly. This will help your credit counsellor get an exact idea about your financial situation, and it's free.
  • You will then be offered advice that is in keeping with your current financial situation. Of course even now you are under no obligation to follow that plan. In fact, your counsellor may even help you find a plan for yourself and help you sort your situation out.
  • If you decide on a debt management plans, the agency will then start sending your creditors payment plans that are in keeping with the budget you have set up. They will also negotiate reduced rates of interest on your loans and waivers, if any .Once this is done, you will make the monthly payment to the agency. The agency will then distribute this payment to the creditors. There are a number of other support services you'll be receiving during the entire period of your enrolment. This includes educative information on websites, free guidebooks on better financial management and frequent checkups to see whether your payment plan is on track.

Is Credit Counseling for You?

If any of the following conditions pertain to you, you should definitely consider the services of a free credit counseling service:

  • You have a number of bills outstanding- and you are unable to manage them because of the late fee, penalties etc.
  • The high interest rates force you to make only minimum amount payments on your credit card.
  • You live between pay checks and are unable to accommodate anything within your budget.
  • You are fast approaching your credit limit in your balances.
  • Your monthly payments are sapping your strength- and you want a plan that will help you attain your financial goals.

A credit counsellor is a specialist who excels in managing financial difficulties, sorting issues of late payments and finding out means to better financial control. Whether you have a difficult situation financially-or simply a query regarding your debts, make that call. The counseling is free, and your counsellor will be glad to help you out!

How Credit Counseling Facilitates the Repayment of Your Debts?

These agencies staff counsellors who are experts at identifying wastages in your spending pattern. They help you find areas where you can save money. They will also work with you to create a plan that is in keeping with your specific needs. This will help you pay off your debts while maintaining your lifestyle. Some may offer you an enrolment in a debt management program, also called a DMP. This plan will help you combine all your debts into one. You then pay a single monthly amount and your agency handles the different disbursements according to plan. Apart from the sheer convenience of a single monthly payment, a Debt management plans also helps you save on interests in the long run. Credit counseling agencies are adept at convincing your creditors about your financial constraints. This helps them negotiate a better rate of interest for you. These are benefits you can typically expect with a DMP

  • Reduced monthly payments
  • Lower interest rates
  • Removal of late fee
  • More knowledge about financial management

Once you are enrolled in a debt management plans, the credit counseling agency will work alongside you till you have paid off all the debts you had mentioned. A number of free educative services are offered to you- and you can use these to avoid financial difficulties in the future. A number of counsellors will help you live a better life according to your DMP. What's more, your counsellor is always available, should you need additional help in dealing with new financial difficulties. You will have a whole group of specialised people helping you pay off your debt.

Is Credit Counseling Costly?

It is normal to expect high costs when you're dealing with a group of experts. The truth is - it isn't! These non profit agencies receive resources from a number of other places. They help you secure a better life financially. The sessions are free the advice you receive and the customised plans are all free of charge.

You may be charged a moderate amount if you are offered a debt management service and you decide to take it. Since they are calculated on a sliding scale, you can afford what's charged as a fee. Many states also have a number of laws in place and they function on a simple principle- that people who are already financially troubled should not be forced to pay a high fee. A typical agency may charge you$35 to enrol, and an additional $25 a month for the monthly services. In fact, in 2011, 18% of the clients just paid a small initial, fee, while 12% paid absolutely nothing for enrolment.31%actualy ended up paying lesser monthly fee and a full 4% received full waivers. Even if you include the fee charged by the agency, an average client would end up saving $5288 in interest over the full period.

Does Counseling Influence The FICO Credit Score?

According to FICO, the use of a credit counseling service doesn't have a negative impact on the FICO score. However, late payments that you make either before you began the plan, or after it may have a negative impact on your score. Basically, whether you received credit counseling or not is irrelevant for your FICO score. Counseling also has absolutely no impact on your score. You're just talking to someone about how to manage your financial troubles and receiving advice about it.

If you join a Debt management plans, it will have an impact on your credit score- simply because the accounts you have enrolled will now be closed. Most creditors require this in exchange for the reduced interest rates they will be offering you .If you go through with the plan, without committing to other debts simultaneously- you will be off to a better financial position in the long run. Look at it this way- suppose your bed was on fire, would you hesitate in douching water on it because it would destroy your sheets? Similarly, you shouldn't hesitate about going for a strategy that will help you manage your debts since you're in such financial peril. If you're in such financial turmoil- you should be more worried about getting back on your feet- and not about your credit score.

Will It Be Difficult To Get More Credit If You Go For A DMP?

Truthfully speaking- that is unpredictable. That's because it varies with every creditor. Some may look at it negatively, while others are unaffected by it. Some may even regard it as a good thing, considering you're enlisting the help of experts to manage your financial situation better. If you have been offered a Debt management plans, chances are that you'll already find it difficult to pay off your creditors at established interest rates within a specified time frame. As you repay your balance, your debt-income ratio should improve. Of course, we assume that you won't take up additional debts in the meantime.

How Long Should It Take?

A debt management plans typically takes about 3-5 years to complete. An average client will typically complete it in 42 months flat! You could lessen your term if you worked on the counsellor's plan! If more accounts are added during that time, your term could be extended.

Why Do Creditors Agree To The Repayment Plans?

Simply put- they agree because they know that these plans work. By working on a disciplined plan, and helping clients secure a better financial position, the agency creates better satisfied consumers.

What's more, credit card agencies do not offer these services. They would be time consuming, to say the least.

They can't provide you the customised solution a credit counseling agency can. These agencies are highly discipline and attuned to the need of their clients, and this calls for exceptional professional ethics.

What Can You Do If There is A Mistake In The Bills Your Counsellor is Paying?

You should call your agency promptly. Thousands of people work on these plans every month- and it entails a lot of management and administrative work for these agencies. Errors might occur, though they are not many. Since your success is paramount,there are many representatives who will deal with the situation immediately. Read up on the information provided, the phone numbers provided etc .This will help you secure better access should you need it.


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