Opt for credit counseling to repay debts as per your affordability

If you are having trouble with overwhelming debts and not finding a way to pay off unpaid credit bills, you can seek help of a credit counseling service and get yourself out of this tight fiscal situation.

What is a credit counseling service?

To manage your credit bills and to have a permanent debt solution, you need to enroll yourself with a credit counseling agency. The agency representative will analyze your monetary situation and will help you prepare a financial budget. He will then contact your creditors, on your behalf, and negotiate with them to agree upon a new repayment plan for you.

The plan will be based on your affordability. With the repayment plan, your interest rates will be lowered, so you need to make lower monthly payments. The representative will also ask your creditors to waive off penalties for late payment and over limit charges.

When should you go for credit counseling?

You can go for credit counseling, if you come across the following situations:

  • You are facing hardship in making payments and have already missed more than 3 installments
  • As you have no other way to repay your debts, you are considering to opt for bankruptcy
  • You are apprehending credit crunch in the near future

What are the factors considered by a credit counselor?

A credit counselor will consider the following factors, to render his service:

  • Your total monthly income and expenditure
  • Total amount of outstanding debt balance
  • Number of debt accounts you currently have
  • Interest rates for the each of the debt account
  • Account having the minimum debt balance
  • Minimum monthly payment amount for each debt
  • Other expenses like medical bills, insurance, tax, etc.

What are the types of credit counseling?

There are four main types of credit counseling, namely,

1.Consumer credit counseling: These are the conventional counseling services, where the representative will analyze your financial condition and will do negotiation with your creditors, to lower the interest rate and to waive off penalties towards late payments and over limit charges.

2.Bankruptcy credit counseling: It is mandatory for you to go for credit counseling, if you want to file for bankruptcy. You have the choice to have counseling over pone, through internet or in a face to face meeting. After analyzing your situation, the counselor will offer you a debt solution. You need to pay $50 to the counselor, for his session. However, if you can’t afford, you can request the agency for a fee waiver, before starting the counseling session. You receive a certificate after the completion of the counseling session.

3.Christian credit counseling: Basically, Christian credit counselors work in the same way as other credit counselors. However, they help you get out of debt by giving importance upon Christian values and creating strategies from the Biblical point of view. However, a non-Christian can also take advantage of this service.

4.Non-profit credit counseling: There are some non-profit counseling agencies that will offer you their service at a lower cost. However, you need to verify its status of non-profit organization, by asking for a 501(c) (3) IRS status.

What are the benefits of this service?

The advantages of a credit counseling service are:

  • You get help in making a financial budget
  • All harassing calls from your creditors will come to an end
  • Your delinquent accounts will have a chance of re-rating
  • You will need to pay lower monthly payments

Prior to enrolling yourself with a credit counseling agency, you should check with the BBB, for the authenticity and reliability of the agency.