Credit Counseling Services
What are credit counseling services? You may have seen the television ads or heard about these services, and if you are struggling with debt may be considering this option. Many people do not fully understand what these services do, the benefits and drawbacks. Before considering this to help you with debt repayment, look at all your options carefully, especially with regard to your credit rating.
Credit counseling services do a number of things for the consumer struggling with debt. First and foremost, they assist with creating a manageable budget. This budget will include a lump sum each month toward debt repayment. The credit counseling service will negotiate with your creditors to lower your interest rates, eliminate fees, and otherwise help you to set up viable repayment plans. The lump sum paid each month to the credit service is then dispensed to each creditor per their agreements.
You should consider several things carefully before choosing to use one of the many credit card company supported credit counseling services available throughout the country. First, are you aware that you may well be able to easily negotiate similar reductions in interest and fees with your creditors on your own? This is a viable option for many people, if they are undertaking a debt reduction plan on their own. If you need assistance with budgeting and similar services, you may find that books by authors like Dave Ramsey are helpful, and your local library or community center might also offer free or low cost money management classes.
Many people assume that using credit counseling services will improve their credit as they work to pay off debt. While the black mark from credit counseling is less significant than a bankruptcy, if your credit is good, this should be a major concern before choosing this option. A notation of credit counseling on your credit report may make it more difficult to get a home loan, and you should be certain that all payments are being made on time. Furthermore, you may need to call each of your creditors and make sure that your payment due dates coincide with the service's disbursement dates for monthly payments.
You may also need to have enough cash on hand to cover initial fees. A deposit in the sum of one month's payment is typically required when you commence the program. Disbursements to your creditors typically do not begin until the second payment. Do keep in mind that you will need to make your own minimum monthly payments to creditors during that month. This deposit is typically refunded at the end of your credit counseling program.
While credit counseling services may help to give you the assistance and discipline you need to get out of debt, they come with a number of drawbacks. You may find it more helpful to work out your own debt repayment plan with the help of good budgeting tools, open discussions with your creditors, and commitment to getting out of debt
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