Credit counseling is an option for individuals who find themselves beginning to sink financially. Consumer debt includes credit cards, personal loans, furniture loans and other unsecured debt. Secured debt is the type of debt that has a home, vehicle or other type of tangible item securing the loan which can be repossessed if the loan is not paid. Bankruptcy is another option, but often someone who is struggling financially can turn to credit counseling for financial results without the complete credit destruction and feelings of failure associated with bankruptcy.
What to Watch for with Credit Counseling
Credit counseling is an industry filled with various companies with varied work ethics. There are some credit counseling companies out there that will tell unsuspecting customers what they want to hear, offering solutions that sound good but in reality will get the person much further into financial trouble. It is important to review the proposed debt management plan to ensure that payments are made from the credit counselor to the creditors in enough time to satisfy due dates and within the appropriate billing cycle. Overlooking these details or assuming the counseling agency will take care of them could land debtors in more debt or fees than anticipated in the long run. Staying in touch with creditors and reviewing accounts regularly can help the debt management plan’s effectiveness. Shop around for a good credit counseling agency; this shopping includes finding a company that has a track record of fulfilling what it says it will do. Check up on the company’s reputation via the local consumer protection agency or the State Attorney General.
Finding the Right Debt Management Plan
It is important to find the right debt management plan. This plan must work for the consumer, including understanding what the company is doing for the consumer and also in giving the consumer access to continue to check up on what is going on with all accounts. The consumer must be clear on what is happening with interest rates, past late fees, whether accounts will be re-aged, and what accounts will be included in the debt management plan. Some companies will collect the first month’s fee for their own payment and begin paying on accounts the following month, which will be either an additional expenditure or will come out of what was supposed to go to the creditors. It is important to understand exactly what is being done with each account, and verify these agreements with the creditor accounts, as well as understand clearly what the credit counseling company is explaining.
Budget counseling is a very important part of the credit counseling experience. Often it seems that everything should be affordable because at a glance the rent and other large bills seem to fit well under the household income amount. Hidden expenses like groceries or gasoline can add up to much more than expected. Get together a list of receipts for things in addition to bills that you spend money on so that the credit counselor can really help. By getting an accurate picture, a reputable credit counselor can help individuals escape a quicksand-like situation with debt and become financially successful again.