5 Things You Need to Know About Credit Counseling

Monday, 21 Mar 2011 12:42 PM

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What is Debt/Credit Counseling?
Individuals seek consumer credit counseling when the only alternative left is filing for bankruptcy. When you seek consumer credit counseling, the credit counselor studies your financial position. Depending upon your debts, the credit counselor designs a debt management plan. To do this, the counselor explores the number of people you owe money, the amount outstanding and past due, your monthly income, and your recurring monthly expenses. The counselor forwards the plan to your creditors for their approval. If your creditors approve the plan, you start making payments through the credit counseling agency to your creditors.
 
Debt/Credit Counseling Service
If you lack financial discipline, you may not pay all your creditors promptly every month. Make use of the credit counseling service in that case. Given their experience, credit counseling agencies often succeed in persuading your creditors to reduce interest rates, waive late fees, or extend the loan repayment period.
 
Five Things You Need to Know About Credit Counseling:
 
1. Ensure that the credit counseling agency you approach is reliable and a non-profit entity. Its counselors should be certified by an independent organization, such as the International Standards Organizations (ISO) or the Council on Accreditation (COA).
 
2. It should be a member of a respected association like the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA).
 
3. If the agency is reliable, there won't be complaints against it. Contact the Better Business Bureau and crosscheck. Also check with the Attorney General’s office or other consumer agencies of your state to find out if any legal investigation has been launched against the agency.
 
4. Some agencies do not fully reveal the services they offer or the fees they collect. Ensure that the agency discloses all these facts up front and in writing. Some agencies may not work out the monthly payments to your advantage. Ask them to explain the calculation. It is possible that they do not pass on the payments you make to your creditors. Find out from them if they can produce official receipts from your creditors for the payments you make. Insist that they periodically send you status reports on your loan accounts so you can ensure that all your payments have promptly reached your creditors. When consolidating your loans, it is possible that the agency leaves out some of your loans. Ensure that they do so only with your consent.
 
5. Ask the agency if it can persuade your creditors to lower the interest rate or waive the finance charges and late fees.
 

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