What is Credit Counseling?

Since our economy has been sputtering along, millions of citizens have found themselves facing a debt monster that is eating away at their peace of mind, sleep and sanity. Seeking options other than bankruptcy, an increasing number of individuals are electing to enroll in credit counseling programs to attack their debt problem. Prior to taking that course of action, there are some key things you need to know about this process and the companies. Otherwise, you might find yourself in a deeper hole and regretting your decision to take credit counseling altogether. Here's what you need to know about Credit Counseling Agencies.

 


What is Credit Counseling?
Truthfully, speaking there are numerous definitions of credit counseling. Which one you get all depends on who you ask. For simplicity’s sake, we’re going to stick with the most commonly known and most widely used definition and here it is. It is a professional counseling service that assists consumers in repaying their creditors by renegotiating their interest rates, monthly payments and payout amounts. It also educates the consumers about credit, budgeting, and financial management.

The companies who provide this service are usually called or classified as Credit Counseling Agencies. This DOES NOT mean the company is legit. Nor does it mean you can trust any and everything they are presenting to you. When it comes to financial services of any kind, remember the words of Ronald Reagan, “Trust but verify!”

There are Two Types of Credit Counseling Agencies
There are those that are Non-Profit and there are those that are For-Profit. It is critically important to know which type of agency you are dealing with. This is crucial because there is a huge difference in the pricing and business model. To be blunt, the For-Profit Credit Counseling Agencies are in it for pure profit. Their motivation is like any other commission based sales company. If they don’t sell, they don’t eat and they love to eat! My warning is, “Stay away from For-Profit Agencies.” In my opinion, it’s just too risky a chance.

What Is The Process of Dealing With A Credit Counseling Agency?
It starts with an initial consultation with credit counselor. This person should be a certified credit counselor with an education and background in finances. Don’t make the mistake of entrusting your financial future to a newbie. Or to a person who obtained the certified credit counselor certification, yet they have no financial education, experience or history of successfully helping others get out of debt. That’s like entrusting a Navy Seaman to lead an Ohio-class submarine into battle and win; it’s not going to happen.

That person then examines your overall financial status - taking into consideration your total monthly income versus your: total debt amount, types of loans, interest rates on each account, the minimum payments and of course your other financial obligations such as: food, utilities, insurance, medical expenses, child support, etc.

After evaluating your financial status, the counselor crafts a repayment plan for you that is within your budget. Next, the counselor sends that proposed plan to all of your creditors for approval. If they are an established agency, getting your creditors to agree will be a formality.

After your creditors agree to the repayment plan proposed by your credit counselor, you start making payments to the credit counseling agency. The credit counselor then distributes the payment to each of your creditors in accordance with the repayment plan.

Joel Marks has been helping people get out of debt and avoid both bankruptcy and foreclosure for over fifteen years. Utilizing savvy debt counseling, debt management programs, Federal laws and a team of attorneys, debt counselors and advisors, he has quietly assisted thousands come from under the heavy burden debt.

 Source: http://debterasure.com/