Credit counseling has been around for awhile now and millions have used this service. While many have had positive experiences, there are also many negative experiences, mostly due to the consumer not being educated properly on what exactly credit counseling does.
Credit counseling services is a popular and lucrative business because they help out people who really need help and will do anything to help them pay their bills.
Most credit counseling services charge between $25 to $100 a month for their services, but are they really worth it? It all depends on what your goals are for the next five years.
Most credit counseling services will help you structure all of your unsecured debt into a repayment plan that will take you about three to five years to pay off.
This is a good time period and is great if you want to get completely out of debt, excluding your home and vehicles. However, if you are disciplined and don’t mind doing a little work yourself, you can save yourself thousands of dollars in fees. Here is how a credit counseling company works.
You give them a call and tell them all of your unsecured loans like credit cards, personal loans and any other type of debt that you may have that doesn’t involve collateral.
They then get in contact with all your creditors and negotiate with a repayment plan. What they basically do is call them and either ask them for a lower interest rate, a reduced settlement amount or a combination of both. The most popular method though is the lower interest rate one.
Here is how you negotiate the lower interest on your account. First, tell them your intentions of what you are trying to accomplish. Most of the time, they will basically freeze your account and cut your interest rate up to 0%.
If you are truly trying to get out of debt, you won’t mind your accounts being suspended, as you don’t need to pile debt back on while trying to pay it off.
If they seem to not want to budge, say you will probably need to file bankruptcy or talk to a manager. They can do it, they do it every day, so there is no reason that you can’t get the deal yourself.
Once you negotiate a deal that you are happy with, make sure you stick with it. Budget those unsecured loans as a lump sum, just like a credit counseling company would do, and pay it at the say time every month. This will insure that you pay every bill you need to every single month on time.
Otherwise, you will just fall into the same trap you were before. If you don’t have the discipline to pay all those bills separately and don’t mind someone else doing the dirty work for you, go ahead and hire a credit counseling company. They are good at what they do and you will be happy if you stick with the results.
Now, just one more reminder. When do get credit counseling services, many lenders, especially mortgage and automotive ones, look negatively at this.
While it is a good sign you are trying to get your finances in order, some look at it like you can’t be responsible on your own and basically need your hand held the entire time. It can be very hard to obtain credit while on credit counseling, so before and prepare not to buy a house in that time period.
In conclusion, credit counseling is an excellent service and you will pay your debt off quicker then you could on your own and you can save up to tens of thousands of dollars in the process. So, if you are not worried about making a major purchase in three to five years and need to get your finances in order, this is a great way to take care of that unsecured debt.