Credit Counseling: What is it Credit Counseling, and is it worth it?
Credit is hard to improve once it has been destroyed. Consumers trust many different methods to improve their credit. It is always a good idea to trust professionals when it comes to serious matters such as credit. Many people trust their credit to credit counseling professionals. Does credit counseling really work, or is it a waste of time and money?
What Is Credit Counseling?
Credit counseling is a program that helps consumers learn how to eliminate debt. The educational program helps consumers establish a debt management plan and a budget to prevent future credit problems. The process involves analyzing spending habit and creating a plan to get out of debt quickly.
Features of Credit Counseling
- Consumers have the help of a trained professional. Credit counselors are trained to handle the needs of all of their clients. Their job is to assess the individual needs of each client and create a solid plan to help them get out of their current debt issues. The process takes time and a considerable amount of knowledge about credit laws and consumer rights. Credit counseling is a serious matter that should not be taken lightly. Credit counseling also provides consumers with a credit counselor that can assist them with all of their credit counseling needs.
- Credit Counselors negotiate debt for clients. Debt negotiation is a very important part of credit counseling. Some clients only end up paying a small fraction of the debt that they actually owe to lenders. Credit counseling allows consumers to reduce their bills to one low monthly payment, reducing the payments to less than the total of the previous payments on all accounts. Credit counseling allows customers to pay less money on their debts. Reductions of 10 – 20 percent are the most common, but consumers may receive reductions of 50 percent or more in some cases.
- Consumers pay less interest with credit counseling. Interest reduction is one of the most enticing options with credit counseling. Some people pay over 26% interest on their credit loans. Paying high interest means that only a small amount of each payment actually goes toward the principle amount owed. Credit counseling offers customers the opportunity to benefit from lower interest rates. Lenders may reduce the interest rates to 5 to 10 percent to help consumers. In some cases, lenders may eliminate all interest. Lower interest can make the difference between getting out of debt in 2 – 5 years or 15 or more years.
- Credit counseling helps consumers bring delinquent accounts up to date. Late payments can cause a great deal of harm to credit. Credit counseling helps consumers bring all of their delinquent payments up to date. After a certain number of on-time payments, consumers prove to lenders that they are dedicated to making the debt management plan work. Once consumers make the payments, their accounts will reflect the current status.
Credit counseling provides consumers with a fresh start with their credit. Over time, the negative information on credit reports will diminish and consumers will have their credit restored.