Consumer Credit Counseling

What Does Consumer Credit Counseling Offer?


There are times when it’s best to seek professional help. Instances of financial difficulty can fall solidly in that category. Sure, with enough time and effort, money problems can be solved on their own. However, it’s always a good idea to get a different perspective, which is exactly what consumer credit counseling offers. 

Let’s take a look.

What is Consumer Credit Counseling?

In the simplest terms, credit counselors offer management advice for your personal finances. They help you identify and eliminate superfluous spending so that you can more readily cover your living expenses as you pay down debt. In other words, they help you develop spending, saving, and bill paying habits capable of lifting you out of debt and avoiding falling into it again. 

The Initial Consultation

Again, the primary task of a credit counselor is to help you manage your income to the best effect. As a first step toward this goal, a counselor will review all aspects of your financial situation, including your income, expenses, debts, assets and financial goals. This initial consultation is conducted free of charge and generally takes about an hour to complete. Once that’s done, the counselor can help you determine your best course of action. 

Additional Services Include

Bankruptcy counseling is one of the requirements of filing for bankruptcy protection. In some cases, you might learn you have more options than you may have thought. Given the long-term adverse effect bankruptcy can have on your credit history, this is always a good idea.

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Homeowner counseling services can help you determine whether a reverse mortgage is a good idea. Certain mortgage lenders require a session with a credit counselor before approval. People who are struggling to keep up with mortgage payments can also benefit from the advice of a credit counselor.

Student loan advice is another service  consumer credit counseling will offer.  This can help you determine the best strategy for paying off those obligations. In addition to reviewing and formulating payment plans, counselors will communicate with your servicer to evaluate different plans to help you find one you can comfortably manage. 

Credit Counselors and Debt Management

There are times when a more vigorous approach is required. In those instances, credit counselors recommend debt management programs. 

A form of bill consolidation, debt management first seeks to lower the interest rates you’re paying. Counselors also work with your lenders to gain fee waivers and negotiate term extensions. The overarching goal is to position you to pay off all your debt within a three to five-year window. 

Rather than sending separate monthly payments to each of your creditors directly, you’ll make a single payment to the counselor each month. This person will then use that money to service your obligations on your behalf. You’ll agree to open no new accounts while in the program, refrain from making new charges, and sometimes close existing accounts to help ensure successful program completion. 

Things to Ponder

While certainly a viable option when trying to get a handle on debt, there are some pros and cons to consider. We hit all the high points above. However, there is another side of the coin to consider.  

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Debt management can have a negative impact on your credit history, though it’s far less of a concern than bankruptcy. Moreover, as we mentioned previously, your accounts will be frozen while you’re in the program. You’ll also have to enroll all eligible debts. Picking and choosing usually isn’t an option. Critically, you also need to be careful to ensure the individual you select is legitimate.

Still, even when you weigh these factors against the benefits consumer credit counseling offers — lower interest rates, fee waivers, a single monthly payment and an end to collection calls — the pros look much better than the cons when counseling and/or debt management is what your situation requires.

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