What is Credit Counseling? And should I use one!

What is Credit Counseling? And should I use one!

Credit counseling is a service offered by companies to educates consumers on how to deal with their own debt. How to avoid accumulation of additional debt and how you can manage your finance so you can eliminate your debt. A credit counseling service will set in place a debt management plan (DMP) which will consider all the aspect of your financial needs and set a realistic repayment plan that will eliminate your debt over a length of time .it will deal directly with your creditors and come to a financial arrangement to suite both you and the creditors. Once a debt management plan is set in place your creditor will close your account to prevent you from getting into debt again.
There are some great benefits to using debt management plans such as
• Lower interest rate and usually lower repayment then previous individual repayments prior to consolidation.
• Managing and tracking your progress is also much easier since all your debt will be consolidated into one loan with one monthly payment.
• Less stressful, no more call from creditors and debt collector asking for their money no need to avoid phone call or delete emails from creditors.
• Most importantly you are actually paying your debt not just interest on credit card.

An important thing to watch out for is who you’re dealing with and what is the real cost of your loan i.e. the total cost of your loan. Although smaller repayments an longer period of time to pay back your loan seem attractive it usually means that you will be paying interest for a longer period and the total cost of your loan will be greater.

Fees always add to the cost of the loan make sure you read the small print and know exactly how much your loan really cost.

Who are you dealing with? Are they reputable? Do they have a good track record can they be verified with a business group such as BBB? There are some reports of debt consolidation services that didn’t transfer the consumer payments to their creditor due to business expense.
You would not want fall prey to these types of services .always use reputable established companies with a good track record .they might seems expensive at first but they can usually workout a better deal because they are market leader. They usually offer support via phone or email and have online debt management tool to visualize your progress.

So should you use the services of a credit counseling firms? By all mean yes it defiantly beats paying minimum repayment on your cards, having separate account for each loan ,tracking each loan ,getting harassed by creditors etc. Just be aware of whom you are dealing with and what is the real cost of the new loan.

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