Credit counseling services, an alternative to bankruptcy, are highly beneficial for people with excessive debt. Today, the demand for credit counseling services is very high because of the increasing requirements for filing bankruptcy. If you are seeking relief from your financial obligations, you can depend on credit counselors. Filing for bankruptcy is a burdensome task. The credit counselors will provide you the best possible options on the basis of your financial situation. You will also get very good assistance from them to evaluate all your financial obligations. Besides bankruptcy, they are also able to discuss various options available for you. If you are skeptical of filing for bankruptcy, you will get proper guidance from the credit counselors.
Credit counseling services are also helpful for developing a plan for you to pay off your unsecured debt like credit card debt. Usually, secured and some other types of debts like student and child support loans are not coming under the service of credit counselors. Therefore, you must continue the payment of your mortgage as per your loan agreement.
Ways to Choose the Right Credit Counseling Services
You must be very careful while selecting a credit counseling agency (for a quality example, check out this agency). Due to the increasing demand for credit counseling services, a number of agencies are working in this field to sell their services. Such agencies may not have real interest to reduce your debt. Instead, they will focus only on the sale of their services.
You will get low-cost or free credit counseling services from local agencies, housing authorities, military bases, credit unions, universities, etc. However, the non-profit agencies you are going to select have proper accreditation to offer these services.
You must also be aware of the service you really need. Some agencies may try to sell a DMP (Debt Management Plan) even if you do not need it. The counseling must include budget analysis, credit report review and proper assistance.
The counselor must be able to ask the right questions to get in-depth information regarding your financial situation. If their questions are not proper, they cannot suggest you a good option to get you back on the right track.
Some agencies may offer you debt settlement services, but you must keep away from them. These people often behave as credit counseling agencies in order to get confidence from the public. You will not get proper financial education from these agencies. Their fee will be very high and they allow the debts of their clients to become delinquent. They will also charge before reaching a settlement. This will cause serious damage to your credit and it will also invite future legal proceedings.
Credit counseling services are not suitable for everyone. You can seek counseling if you are not able to make a little more than your minimum payment per month. It is also suitable if your
credit limit is near or over or if you receive collection calls constantly.
You must be prepared to face some very tough questions if you are going to seek the credit counseling services. Your monthly income and expenses will be a major topic of discussion. You must provide honest and open answers about your financial situation. In order to establish an effective budget for you, the counselors need a complete understanding regarding your finances.
There is a huge percentage of the population who are in a debt hole right now (and countries, too) These people in a debt hole are those who have put themselves in so much debt by using their credit card so much and they are unable to pay for it. The convenience of using a credit card has gotten the best out of these people and they find it very hard to find their way back or get out of the debt hole. Most people think that it is impossible to get out of it unless money magically appears from nowhere to pay off their debt.
Most of these people have learned their lesson too late and they had to learn it the hard way. Using the credit card itself is not a crime but some people get way too comfortable with their credit cards and use it too much. Though the credit card has made life much easier for a lot of people, it has also made life much tougher for people who have used their credit cards way too much. It becomes a habit for a lot of people, a habit very hard to break which causes a continuously growing debt.
Credit card debt is not something that will eventually disappear when you start paying for it slowly. Most people who receive their credit card bills only pay for the minimum amount that is stated on their card and this can cause a huge problem. Often times, the interest on the amount of credit card debt is too high and the minimum amount only covers the interest. When this happens, no matter how long you pay your credit card, your balance will never get smaller. You have to make sure that you pay more than the minimum amount to make sure that your debt will decrease.
Also, another reason why credit card debt is so hard to erase is the fact that people still use their card even when they have a huge balance on their card. Some people never learn and they continue to use their credit cards even if it is almost maxed out. There are people who never learn or simply refuse to understand how credit cards work. These credit card problems happen because people have a totally wrong mentality of how to use the credit card properly. There are some people who perceive that the credit card is an unlimited supply of money and these are the people who get so deep into the debt hole that they rarely find a way to get rid of their credit card debt.
The best way to deal with credit card problems is to change your lifestyle. People who have gotten out of debt were able to pay off their debt by living minimally and within a budget. This might not work for everyone but it is worth trying. There is help available online at sites like http://www.creditguard.org/credit_card_debt.html for people who desperately want to get out of their debt hole and turn their lives around.
Credit consolidation is one of the most important tools a borrower has in reducing the difficulties of his or her financial obligations. To make a long story short, credit or debt consolidation is the process by which you pay off all your debts using a special loan or balance transfer, thus "consolidating" all your loans into one larger loan. It's as simple as that.
Why It's Important
Whenever we talk about debt, many people assume that it is a given amount of money that one owes to a particular bank or lender. Unfortunately, that's not true. Most people who owe money, usually owe it to multiple lenders and financiers. Since this is the case, multiple debts ultimately lead to multiple interest rates, thus increasing your financial obligations and draining more of your income.
Moreover, because you are facing several debts, you also need to remember that your credit score will be exposed to even further risks and problems. So given such problems, consolidating all your debts will not only help you pay off your obligations, it will also help you protect your credit score.
How to Pick a Credit Consolidation Plan
In order for credit card debt consolidation to be practical, the consolidation loan that you will need to get has to have a lower interest rate. It also needs to have a lower repayment time than all your other loans. To do this, you will need to calculate the average interest rate of all your loans and compare that to the interest rate on your own consolidation loan.
Moreover, you should decide whether you want a long term, total repayment method or a short monthly repayment plan. Although the latter is generally more expensive, what you also have to remember is that if you decide to make your payments over a long period of time, you may end up paying more interest than you might expect.
Requirements for Getting a Credit Consolidation Plan
In order to get a credit or debt consolidation plan, you will need to have a relatively high credit score. The problem however, is that most people who need these plans are the ones who also have bad credit ratings. Despite this though, you can still get a debt consolidation plan even if you have a bad credit score. The only problem is that you may not qualify for the best interest rates for your consolidation loan.
Aside from your credit score, a debt consolidation program may also have other requirements, particularly if you have a total debt that exceeds $20,000. If this is the case then your lender will ask for some assets as collateral, like your house or your car.
Credit Consolidation is Not Debt Management
It's important to remember that credit or debt consolidation is not the same as debt management. The latter only makes regular payments to your creditors, while the former involves paying them off completely in one go. As such, you need to remember that debt consolidation is a very specific term, and should not be confused with the other methods used to pay off debt.