Consumer Credit Counseling: Effective Way to Deal with Debt

Although the economy has improved over the past year or so, many people are still dealing with the effects of long-term unemployment and reductions in pay, namely credit card debt and other bills that are difficult to manage. It might be tempting to consider taking out a debt consolidation loan in order to pay off the outstanding bills and make only one payment per month. However, that is just trading one set of debts for another and not doing anything to help you reduce your debt balance. A better option to consider is consumer credit counseling.

Working with your creditors, a credit counselor will reduce both interest rates and monthly payments, as well as get certain late fees and other charges waived. They then set up a monthly payment schedule with your creditors. You make one payment each month to the credit counselor, who disburses that money to your creditors according to the approved schedule. With this plan, you can have your debt paid off much sooner, saving you thousands of dollars in interest charges.

Consumer credit counseling offers a number of benefits that debt consolidation loans or debt settlement plans do not. These include:

  • Working with your creditors to create an affordable payment plan
  • Eliminating collection calls that often come at inconvenient times
  • Working with a trustworthy counselor who will handle your payment plan as arranged
  • Money management counseling in order to avoid future problems

Credit counselors typically work only with unsecured debt, such as credit cards. They can also help you with settling outstanding medical bills, student loans and other bills turned over for collection. Most counselors offer a free no-obligation consultation where they will review your situation with you and let you know what they can do to help. While they do not themselves make loans or offer legal advice, they may be able to refer you to someone who specializes in those fields if it is appropriate.

Consumer credit counseling can be an effective way to bring your unsecured debt payments under control. It is also a great way to learn how to manage your finances in order to avoid debt problems in the future. While it may seem impossible today, a credit counselor can help you create a path toward being debt free in just a few years and back on the road to a solid financial future.

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What You Should Know About Non Profit Credit Counseling

research non profit credit counselingConsumers searching for solutions to their debt problems often discover credit counseling and consolidation services. This is a great choice to help you get your debt under control and reduce the amount of minimum monthly payments you are making. As you perform your research, you may discover that there are non profit credit counseling services out there. What are these and are they a good option for you?

Does a Non Profit Credit Counseling Service Charge a Fee?

One of the biggest misconceptions about a nonprofit credit counseling service is that they don’t charge their clients a fee. You need to remember what nonprofit actually means. Any company or organization that calls itself nonprofit simply puts all earned income back into the business. This can be in the form of employees’ wages or improvements to the business. However, they do sometimes charge a fee for their services. Some companies may request a ‘donation’ instead of charging a fee.

How Does a Non Profit Differ From a Regular Consolidation Service?

The only real difference is where they put their fees. A for profit service may have shareholders or another way that they share the dividends with employees. A non profit credit counseling agency puts all money back into the business.

Which Choice is Better for Me?

It really depends on what your goals are. You need to do your research and narrow your choices down before deciding who you want work with to get out of debt. Non profit versus for profit may mean nothing to you. One is not necessarily better than the other. As with anything, do your research before jumping into any debt consolidation services.

Non profit credit counseling can be a good deal for the consumer if they charge lower fees than a for profit service. However, don’t let the term nonprofit lead you to believe that they are necessarily cheaper or better than another service. You still need to research any company that claims to be a nonprofit to make sure they are legitimate.

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Enjoy a Debt-Free Lifestyle with Non-Profit Credit Counseling

debt free lifestyle

The most reputable credit counseling services are non-profit, but this doesn’t mean they all offer the same quality of service. The aim of non-profit credit counseling services is to help people who are spending all of their earnings to repay debt and have nothing left at the end of the month for savings.

There are many reasons people find themselves in debt. They may not have enough income to cover their daily expenses, they may have had to pay for an unexpected home or automobile repair or a huge medical bill. Whatever the reason, a non-profit credit counseling service can help them consolidate their debt so it can be quickly and easily repaid.

There are several trade associations for non-profit credit counseling. They include the Association of Independent Consumer Credit Counseling Agencies (AICCCA) and the National Foundation for Credit Counseling (NFCC). Each foundation has member agencies all over the country to help individuals and families get out of debt.

A good quality non-profit credit counseling company will often give applicants a free, no-obligation counseling session. Their debt situation will be reviewed, and they will be asked to think about their long term goals.

Counselors will examine the applicant’s expenses, income and debt including the interest rates. Based on this, the counselor will recommend a plan for spending as well as a budget. This is a very important step because it will not only help repay the current debt, but help people stay out of debt in the future. Non-profit counselors help with credit card debt as well as secured debt.

If the applicant is interested, the counselor will recommend a Debt Management Plan. The debtor must agree with this plan in order for it to be effective. This type of plan usually consists of a three to five year plan to repay debt, lower interest rates on existing debt, negotiation with the credit card companies to stop extra fees and penalties and freezing credit card accounts.

When looking for a reputable non-profit agency, people should ask about any fees right in the beginning. A good agency will be happy to give information about their fees in writing. People can also ask for references from the agency’s former clients.

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The Benefits of Consumer Credit Counseling

consumer credit counseling can relieve stress

In today’s economy, many people are struggling. The amount of available jobs is dwindling exponentially, and people have turned to loans and credit cards to make ends meet. It is completely possible to get in over your head. If you have an unexpected injury or illness, and have little or no insurance, you’ll be adding medical bills to this debt snowball and you may feel that you have no way out. There is no shame in this; it happens to even the most financially-savvy individuals.

The most important thing is how you handle unmanageable debt. You can always file bankruptcy, but this is a long, expensive and humiliating process. It also ruins your credit for at least seven years, and can cost you certain jobs for the rest of your life. If you ignore your debt, it won’t go away; it will only get worse. A debt with a few late charges can turn into a massive charged-off account with attorneys and collections agencies calling you non-stop. Eventually you’ll be facing a lawsuit that can drag you through the courts for years until you get it paid off. Not to mention that your credit will be absolutely ruined. The best approach is to handle it head-on. This can be a difficult process, which is why it is important to get a professional consumer credit counseling agency to help you.

A consumer credit counseling agency will sit down with you and make a comprehensive list of all your outstanding debts and monthly bills. They’ll figure out your monthly income and how much you can afford to pay on your debt. The debt counselor will then do all the legwork for you to get your debt to a manageable state. They will contact all of your creditors and work out payment arrangements that can include smaller payments and extended pay-off times.

Once you have a pay-off plan in place, you can begin paying off your debt each month until it’s gone. Some agencies require you to make the payment to them each month, and they dole out each creditor’s share themselves. Other agencies will let you pay your creditors directly, but they require some proof of payment.

Another benefit of using one of these services is that they can help you avoid creating any new debt. Most counselors will either close your revolving accounts, such as credit cards and charge cards, or have you do it yourself and provide proof of account closure. By removing the ability to make new charges, the temptation to create more debt is gone, and you’ll save yourself further headaches.

Consumer credit counseling services can help shoulder the burden and give you relief from the stress of debt, while helping you work your way free. If you are struggling to make ends meet, this can be your best option, and is worth further exploration.

photo credit: kharied via photopin cc

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