Are you having a hard time managing debt? Before the situation goes from bad to worse, you should consider credit counseling services. The credit counselors will use their budgeting and money management expertise to create a debt management plan for you. In this post, you get to learn key insights on credit counseling.
What is Credit Counseling?
The term credit counseling refers to a professional service that supports people to get out of debt. Typically, the process starts with a financial analysis before the counselor helps you to understand the options you have to recover from debt quickly. Notably, credit counselors also help you develop a debt management plan. Besides, they can act as an intermediary between you and creditors.
The two types of credit counseling organizations are for-profit and non-profit agencies. Usually, the difference between the two is their revenue streams. The for-profit agencies make money by charging clients a service charge. In comparison, non-profit agencies rely on grant money provided by credit companies and the government. Thus, you pay fewer out-of-pocket fees for credit counseling services offered by non-profit agencies.
Types of Credit Counselling Services
A credit counseling organization can provide the following services:
- Help you explore debt relief options
- Help you eliminate your debt balances for unsecured loans
- Protect you from debt collectors
- Train you on financial literacy, including budgeting and credit management
- Support you to develop a long-term financial plan
How Does Credit Counseling Work?
The credit counseling process has several significant steps. For starters, the counselor gathers information about your financial situation. Thus, expect questions regarding your income, debts, expenses, and current balances on your accounts. Then, the counselor conducts a soft credit history analysis. With such information, the counselor can review the best options. In practice, the recommendation may include balance transfer, loan consolidation, debt management programs, debt settlement, or filing for bankruptcy.
Benefits of Credit Counseling
The primary benefit of credit counseling services is that they can help you avoid bankruptcy. Even when you file for Chapter 7 or Chapter 13 bankruptcy, one qualification is that you must have attended credit counseling. With credit counseling services, you no longer have to face your financial challenges alone. Instead, you can rely on the support of a certified credit counselor with the skills and resources to reverse your financial situation. Then, the credit counselors acts as an intermediary between you and your creditors. This intervention saves you from the burden of facing your creditors and harassment while helping you negotiate favorable terms of repayments. Notably, you get assistance with budgeting and payment management after negotiating with creditors.
You can avoid bankruptcy and improve your debt situation through credit counseling services. Nevertheless, keep in mind that a credit counseling agency cannot repair your credit, provide immediate debt forgiveness, or nullify existing court actions on your debt.