Debt & Credit Counseling
Debt counselling and credit counselling are associated services and are terms that are constantly interchanged. Credit counseling services are intended to educate individuals on debt and the ways to use credit wisely. Debt counseling services are offered for people who have not had credit counseling or have not listened to sound financial advice and now find themselves with a larger amount of debt than they can afford to pay for.
Credit counseling includes examining your present income and living costs and designing a budget to fit your goals and needs. Your debts and assets will be looked at to find out your financial well-being and tips could be given to stabalize your situation. Credit counseling can assist you in picking up better money management skills and could provide tips on how to steer clear of consistently seen financial problems. Debt counseling involves assisting those who have acquired too much debt and are finding it challenging if not imposable to make all of the payments required of them.
Two basic versions of debt couseling exist – not-for-profit organizations that typically give credit counseling and go on to show you how to get out of your extensive debt and for-profit companies that also provide credit counseling and, for a fee, take on the task of getting you out of your messy debt situation. The goal of debt counseling is to help you in finding the optimal solutions to your financial worries. These include:
- Avoiding bankruptcy.
- Protect your paycheck from being garnisheed and avert legal action.
- Stop collection agencies harassment.
- Get sound financial help from knowledgeable persons.
- Reducing or getting rid of interest on debts.
- Reducing your monthly payments to an affordable level.
Debt counseling will commence with a review of a person’s earnings and living costs to learn the magnitude of the situation. The counselor and you will then select the best course of action.. You will initially make major decisions such as what expenses you can eliminate and/or reduce (perhaps trading down to a less costly automobile or eating out much less regularly). Following a honest assessment of your circumstances you will compose a budget that you have to live on.
Once you’ve set the budget you’ll know if there’s enough cash to steadily get your debts back under control. In the event that it is decided that there is not enough money on hand to make full monthly payments to your creditors, but there’s a large enough amount to make a reasonable monthly payment you’ll be required to create a plan to repay your debts over a long period of time. If after thoroughly reviewing your debt situation you are in such bad shape that bankruptcy is the one and only answer then that option will have to be explored by you.
If your situation is critical enough that you’re not able to make full monthly payments to your creditors but not serious enough that you need to go bankrupt, a debt repayment plan is in order. The most ideal and cheapest way to straighten out your credit, especially if your debt load is low below $5000 and you have enough discipline not to get into any more debt until you have your finances under control, is through your own efforts. Suffering in silence is not a good idea, swallow your pride and chat with your creditors to negotiate with them, they know that recovering a little money is better than recovering none and they will try to agree to your requests.
Creditors recognize that a client willing to negotiate a debt provides them a better deal than one who ignores their obligation and are typically willing to settle for a bit less than is owed them. Simpley talking to you creditor can result in a lower interest rate until you get back on track. Other strategies involve making use of a 0% credit card balance transfer where a different credit card debt company will absorb your credit card debt from other credit card companies and have you pay a lower interest rate.
If you feel that you are not able to look after your credit problems yourself then you can always go to a credit counseling organization who will do all of this for you. For-profit counseling organizations will develop a sensible payment schedule on behalf of their client, one the client can live up to. The plan will likely involve a reduced payment schedule and reduction in late fees, over-limit fees and finance charges. Every month you give money to the credit counseling service, which in turn sends payments to those you owe. A large amount of borrowers make small payments to credit counseling services, but the client’s money goes 100 percent towards the reduction of the debt.