Credit Counseling and Debt Management

Being in financial trouble can feel like being captain of a sinking ship. Your first instinct is to try and make it shore on your own but there comes a time when we all need help. There are non-profit certified credit counselors that can provide you with the guidance you need. In this article you'll learn how credit counseling works, how to choose the right one and how to avoid the sharks.

  • Find help
  • Lower payments
  • Avoid predators
  • Pay down debt

A credit counseling agency will analyze your financial situation and offer educating materials, workshops and seminars to teach you more about personal finance. They will form a strategy to eliminate your debt and put you on a path toward achieving your long-term financial goals. The counselor will review your existing budget or helping you to create a new one. If they don't feel that budgeting alone will get your finances under control they may recommend a debt management plan.

Debt Management Plans

A credit counselor can negotiate with your creditors to lower your monthly payments on your unsecured debt like credit cards, medical bills or student loans. By coming to an agreement with your creditors they can lower your interest rates and eliminate fees. Your monthly payments will be consolidated into one more affordable payment that you'll now pay to the credit counselor. (Expect to pay a small monthly fee to the credit counselor for managing the plan.) In exchange for agreeing to the plan creditors will usually require you to make your new payments on time and avoid building up any more debt or risk having the plan voided. With lower monthly payments, a workable budget and a commitment to not adding debt you will hopefully be in a position to start paying down your balances.

Choosing a Credit Counselor

A reputable agency will be non-profit, federally approved and employ certified counselors. Even if someone personally refers you to an agency be sure to check them out for your self. Ask to see their IRS non-profit status and check online to see that they have been certified by the Federal Trustees Office. A good agency should assign you with your own counselor and only charge a small fee for their services. Be sure that you've read and understood the contract and get a copy before signing on with an agency. If you have any doubts you can always check them out with the Better Business Bureau.

Sharks in the Water

When you're in distress there will always be someone looking to prey upon you so be aware. Here are some thing to avoid:

  • Counselors pushing services you don't need
  • Large up front fees
  • No budget help just a debt management plan
  • No long term counseling, workshops or seminars

Drowning in debt can be a very helpless feeling. But once you learn how to identify them you'll find there are many trustworthy non-profit credit counselors out there that can help you to right you ship.

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