Debt Consolidation Loans

Credit Counseling 101

Credit counseling the most recommended debt strategies when you can’t pay your debts on your own. However, statistics show that the majority of people who enroll in credit counseling don’t complete the program. They either go on to pay their debts on their own or they end up filing bankruptcy. Obviously, you don’t want to be one of the people who ultimately file bankruptcy, so you have to learn how to make credit counseling work to your advantage.

How Credit Counseling Works

When you contact a credit counseling agency, the counselor reviews your financial situation, including your monthly budget and your debt. Then, based on your expenses and your credit card payments, the counselor determines whether you would be a good candidate for a debt management plan or DMP. The DMP is a payment arrangement with your creditors that includes lower minimum payments and lower interest rates. If you don’t qualify for a DMP, the counselor will recommend another solution for you.

After the counselor determines you qualify for a DMP, the counselor contacts each of your creditors to negotiate participation in the DMP including your lower interest rate and minimum payments. You’ll be notified if any of your creditors don’t accept the DMP or if you have to bring your account current before you can start a DMP.

Then, once all the details are worked out, you begin sending a single monthly payment to the credit counseling agency to cover the payment for your debts enrolled on the DMP. Your monthly payment will also include the credit counseling agency’s fee for their services.

Using Credit Counseling to Your Advantage

Your goal is either to pay off your debts on the credit counseling program or to be one of the people who quits the program to pay off debts on their own. While you’re on a debt management plan, don’t take on any more debt. Remember, the goal is to pay off your debt and accumulating more will make it harder to become debt free.

Use credit counseling as a way to get some breathing room from your monthly debt payments while you get your finances back on track. If you stay with a debt management plan, it will take three to five years to pay off your debt. However, you can pay off your debt sooner than that if you get your finances under control and create extra money in your budget. When you can afford to send an extra payment do it. Or, start putting some money into a savings account each month and when you’ve accumulated enough, pay off one of your credit cards.

Like all debt solutions, credit counseling isn’t for everyone. Learn all about the pros and cons of credit counseling, to learn if this is the strategy you should take with your debt.

1. Overview of Consumer Credit Counseling
2. Advantages of Credit Counseling
3. How to Know When Credit Counseling is Wrong for You
4. Debts That Work Best for Credit Counseling
5. Clearing Up the Confusion Between Debt Consolidation and Credit Counseling
6. Debt Management Plan: A Crucial Part of Consumer Credit Counseling
7. Choose a Reputable Credit Counseling Agency and Avoid Scams

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