What is Credit Counseling?

As Americans increasingly find themselves deeply in debt, the credit counseling business has rapidly expanded. The new bankruptcy laws, which mandate initial credit counseling before an individual or couple can file bankruptcy, have also contributed to a boom in credit counseling. Thousands of companies offer credit counseling, but what exactly does this mean?

Credit Counseling Services

Credit counselors work with you to help you learn to manage your credit. Ideally, credit counseling takes place before you're in trouble, when the credit counselor can educate you how to best avoid incurring debts that you won't be able to repay. Shouldn't you already know this? Not if you went to public school in America, where financial education is thought to be a subject unworthy of the hallowed halls of academia.

As a result of the average person's lack of financial education, most people who seek out credit counseling are already beginning to experience credit problems. In such a case, a credit counselor can work with them to develop a practical, sustainable budget to repay their debts. If this isn't feasible, then more drastic action, such as debt consolidation or establishing a debt management plan, may be required.

Debt Consolidation Plans

If you're truly in over your head, your credit counselor may suggest that you establish a debt consolidation plan. This means that your credit counselor will work with each of your creditors to synchronize the due dates of your bills and lower (or eliminate) the interest rates that you're paying. Then, instead of sending checks to each of your creditors each month, you send one payment to your credit counselor, who disburses the funds to each of your creditors. Although your credit counselor takes a fee for his services, you will save in the long run due to the reduced interest payments and all of the late fees you'll avoid thanks to the ease of having only one bill to pay each month.

To learn more about credit counseling and debt management, please browse the articles on Debt Relief USA. We aim to be your primary source for information regarding your credit decisions. Good luck!

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