Consumer credit counselors | How they work and ways to benefit

Consumer credit counselors – How do they help you?

Many people don’t know that consumer credit counseling can work as a substitute to filing bankruptcy. Expert credit counselors can educate you on various financial topics and offer debt counseling services after thoroughly assessing your financial condition.

Once you sign up for the services of a consumer credit counseling agency, your debt level would be evaluated by a professional credit counselor. Subsequently, a repayment plan is worked out on the basis of your income and debt level. They would negotiate with your creditors to reduce your interest rates and establish a debt management plan that would help you get out of debt.

How does consumer credit counseling work?

While setting up a debt management plan, your financial situation is comprehensively assessed by the credit counselors. Given below are the factors that are primarily taken into consideration:

  • Number of credit accounts you have
  • The outstanding balances of those accounts
  • The interest rates
  • Minimum monthly payments
  • Delinquent accounts (if any)

The credit counselor also takes into account how much you earn each month and how much you spend. Taking all these factors into consideration, a debt management plan (DMP) is created to pay off your bills. Every one of your creditors receives this suggested plan for acceptance purposes.

As soon as they agree to the suggested debt management plan, you need to start making payments to the consumer credit counseling agency. As per the DMP, this payment is allocated to your creditors. When you enter a DMP, your credit accounts are usually frozen so that you don’t run up new balances.

Fees of consumer credit counseling services

A host of credit counseling agencies maintain that they’re nonprofit in nature. Even though an agency declares themselves to be nonprofit, you shouldn’t by any means assume that their services are free of cost. More often than not, their services are available to you against a fee. The initial payment made by you might be used to compensate for the fees. On the other hand, some debt management companies might ask for a flat fee which is deducted from your monthly payment.

Do you really need counseling?

You can also get the benefits of counseling even if you don’t go for the services of an agency. You can do on your own what a counselor can do for you. Nevertheless, there are many individuals that prefer to go for their services.

When you don’t know how to negotiate a repayment plan with your creditors, then consumer credit counseling can help you. Some counseling professionals are skilled to work with creditors and can get you better terms than you can without anyone’s help.

If you understand that you wouldn’t be adequately disciplined to make multiple payments to your creditors each month, then you should seek the services of a counselor. In this manner, you become responsible for making just one payment to pay off all your credit card bills. The rest is done by the counselor.

What next?

If you’ve decided to go for consumer credit counseling as a debt solution, you should always look for a trustworthy agency that would help you come out of debt. You must avoid companies that are not transparent regarding their fees and services.

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