What Is Credit Counseling?

Wednesday, 27 Oct 2010 11:13 AM

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What is Credit Counseling?
If you are burdened with debt and find it difficult to emerge from the debt trap, you need credit counseling. The debt/credit counseling option helps you go about the task in a methodical and less painful way. 
 
What is Consumer Credit Counseling?
You seek consumer credit counseling when the only alternative left is filing for bankruptcy. When you seek credit counseling, the credit counselor studies your financial position. Depending upon your debts, the credit counselor designs a debt management plan, or DMP. To design a DMP convenient to you, the counselor will seek all relevant information from you. This includes: the number of people you owe money to, the amount outstanding and the amount past due, your monthly income and your recurring monthly expenses. The counselor forwards the DMP to your creditors for their approval. If your creditors approve the DMP, you start making payments to the credit counseling agency and not to your creditors. The credit counseling agency forwards your payments to your creditors as laid down in the DMP.  
 
Credit Counseling Services
Should you seek credit counseling service? Not necessarily, since you can perform the tasks a credit counseling agency does. But some people are more comfortable if the credit counseling agency handles the job for them. Given their experience, credit counseling agencies can often persuade your creditors to reduce the rate of interest, waive late fee, or extend the loan repayment period. Also, if you lack financial discipline, you run the risk of not paying all your creditors on schedule every month. Make use of a credit counseling service in such a case; it is the best way of settling your debts smoothly and without default.
 
Consumer Credit Counseling Services
Several agencies provide consumer credit counseling services. Remember to ensure you approach only a reputed consumer credit counseling service agency, and one that has been in business for some time — say seven to 10 years. The consumer credit counseling service agency should be a non-profit entity, and its counselors should have been certified by an independent organization. The agency itself should have been accredited by the International Standards Organizations (ISO) or by the Council on Accreditation (COA). Needless to say, the consumer credit counseling agency should be licensed and bonded to do business in your state, and must comply with the laws therein. Its setup and monthly maintenance fees should be reasonable, and the agency should be a member of either The National Foundation for Credit Counseling (NFCC) or The Association of Independent Consumer Credit Counseling Agencies (AICCCA).
 
American Credit Counseling Services
American Credit Counseling Service Inc. is a non-profit community service organization. It provides credit counseling, money management education, and debt management programs to consumers, free of cost. It assists those in financial distress, whatever their income or debt ratio.

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