How can a credit counselor ease your financial pain? More than a million Americans each year call on counselors to help out when credit woes threaten to capsize their financial security. While credit counselors can’t renegotiate the overall amount of your debt, they can negotiate with the various lenders to lower your interest rates, often by as much as 50%. A trained and certified counselor can also help you to:
Create a personalized budget and a debt management plan;
Eliminate late payment penalties and other fees;
Distribute payments to each of your creditors.
All of this can put you back on the road to financial stability. If a credit counselor sounds like just the thing to get you out of debtors’ purgatory, read on as we show you what to look for in a guide.
Some Other Things to Consider:
Don’t be pressured into a snap decision. Of course you want to act promptly to address your debt problems, but a reputable credit counselor will allow you time to evaluate the offer. Ask around and choose the solution that best suits your circumstances.
DMPs usually cover only your unsecured debts, meaning you’ll still need to make payments on secured debts such as car loans or mortgage. Find out which debts will be included and excluded from your DMP.
A successful DMP can take between 30 and 60 months to finish. You’ll often be required to not apply for any additional credit and not to incur any additional debt while you are participating in the repayment plan.
The agency should provide regular statements to you showing how your funds were distributed, and should be available to speak with you during regular business hours.
If you are truly destitute, ask if the agency will reduce, postpone or waive its fees due to your circumstance.
If you are hoping to renegotiate the total amount of your outstanding debt, you’ll need to explore debt settlement.
In addition to a repayment plan, reputable credit counseling agencies will help you manage your finances in the long-term through counseling and education. Ask whether yours offers free workshops or educational materials. (To get started, see Six Months To A Better Budget and Get Your Budget In Fighting Shape.)