Credit counseling means asking for help to manage your finances. This would entail assessing your cash flow, monthly payment obligations, interest payments and budgeting. The primary purpose of this exercise is to help you get out of your unsecured loans. This includes your medical bills, credit card bills, student loan, etc. The ultimate goal being: help you get out of the debt trap.
Types of Credit Counselors:
There are many credit counseling agencies working across the country, typically of two types;
For-profit credit counselors: These agencies as the name suggests runs on a profit basis and charge a hefty fee from their customers. Due to their expensive nature, people don’t prefer to go to them. Which takes us to the second and more popular type of credit counseling agency;
Non-profit credit counselors: They don’t charge you a big fee but work on nominal charges. They may ask you to donate to a specific charity as a remuneration for their services.
How Credit Counseling Works:
You approach a credit counseling agency that will arrange a session for you with one of their counselors. These are certified, trained professionals meant to get you out of your financial challenges. The session can be done online or over the phone or in person. It may last for an hour or so. In that session, the counselor would seek information about your current debt situation, your monthly income level and your expenses.
It would then advise you on what is the best option for you to help ease your financial woes. A follow-up session can arrange if needed. In this way. The credit counselor will negotiate with your creditors and try to get concessions on your debts. This is usually done through prearranged interest rate reductions and then inform you about it. There could be a host of solutions best suited to your particular need or issue. One solution doesn’t fit all here at all.
Services offered by Credit Counselors:
Credit counselors provide a variety of services. The more popular of them are;
Debt Management Plan: It would imply lumping your small debts and paying them with a reduced rate of interest over a longer period of time.
Bankruptcy Counseling: If bankruptcy is the best solution for you it would advise you to go for it and provide educational sessions and guide you through it both before you apply for it and when your assets are sold to discharge your liabilities.
Student Loan Counselling: It will help you get over your student debt by negotiating with your creditors and giving you the best available option.
House Counselling: If you want to buy a house for the first time or you want to better manage your rent. The sessions can be really helpful.
General Budgeting: This means getting an overview of your finances and your projected incomes and expenses. How to take control of your financial life and better manage your money to lead a prosperous life.
Their forte though is debt management plans. Many credit counseling agencies also offer free educational courses and online resources to help you manage your finances better.
When to approach a Credit Counselor:
When you know your financial situation is getting the day. You are receiving calls reminding you of your late payment obligations it’s about time to employ the services.
What to look for in a Credit Counselling Agency:
There are hundreds of credit counseling agencies functioning across the country. The important thing is to find the one that best suits your needs. Look for the following in a credit counselor before you finalize it.
Know its credentials: The credit counselor accredited and certified. Good credit counseling agencies are members of the National Foundation for Credit Counselling or The Financial Counseling Association of America. You can also look for them in your state’s local attorney office. The United States Trustee Program also keeps a list of credit counseling agencies. These give them a legitimate seal of approval and you can be sure that they will provide you a good service.
Charges: Before you commit to any credit counselor get a clear picture of the cost of their services and their charges. You should know how much you will expect to pay it in the form of fees or donations. There should be no hidden charges and everything should be crystal clear.
Accessibility: Most credit counselors prefer to provide in-person counseling sessions. Other alternatives are available too. Look for the one which is mutually acceptable and convenient.