Consumer Credit Counseling Service
The consumer credit counseling service is a process in which a consumer hires a third party company to repay the credit card debt they owe. This is often done through a debt management plan, which is usually administered by a non-profit. The consumer credit counseling services usually involve a negotiation process with the creditors, which assist in reducing minimum payments and high interest rates. The creditors often reduce the minimum payments and interest, to avoid that consumer from filing bankruptcy. When considering various types of debt relief programs, this type of program will not harm the consumer's credit rating in a negative way.
The purpose of our company is to bring consumers to a state of awareness when it comes to credit counseling. It’s important for consumers to know why these services are as popular as they are, what benefits these programs have to the consumer and what to look out for when selecting a counseling service.
3 reasons for selecting a consumer credit counseling service
Reason # 1: One monthly payment
One of the most popular features to these types of services, is the ability to have one monthly payment. This type of program allows the consumer to enroll various amounts of creditors into one lump sum. So regardless of how many creditors the consumer would have, by enrolling into a consumer credit counseling service, the consumer would have one monthly payment. When worrying about several minimum payments each month, this reason will often bring a great deal of stress relief due to only having to worry about one monthly payment. When considering credit counseling, the consumer will be able to setup this one monthly payment for any date they prefer.
Reason # 2: The interest rates
This has to be the second most popular reason for selecting consumer credit counseling services. When enrolling into a credit card consolidation program, the servicing agency will negotiate with the credit card companies to have the interest rates reduced. According to recent polls, the average consumer interest rate tends to be at around 17%. When making minimum payments on interest rates like this, consumers will find that a huge amount of the minimum payments made will go towards interest. Finding help with credit card debt through credit counseling, will help consumers and give them an advantage when trying to pay off the debt they initially charged up.
Reason # 3: Delinquent accounts brought current
The third reason for credit counseling, is to bring delinquent accounts to a current status. This is often referred to as the re-aging process and is only usually done after a series of payments. So if a consumer was one to three months behind and made a few payments, the creditors would bring the accounts to a current status which may work wonders on the consumer’s credit. Now when we say this program brings delinquent accounts current, this program is not for consumers who have seriously delinquent accounts. Creditors that are more than five months behind,are usually best candidates for something like a debt settlement program.
2 downsides to consumer credit counseling services:
# 1: The accounts will be put on hold or closed::
When making minimum payments on credit card debt, consumers often have the ability to use the credit cards given they decide to. When enrolling into a consumer credit counseling service, the accounts the consumer enrolls will be either put on hold or closed. When the creditors go to such extents to reduce the minimum payments and interest rates for the consumer, they see it as doing that person a favor. In exchange, they don’t want that person to continue to use the cards as that consumer wouldn't be learning anything from the actual service. When trying to get out of debt, this is a small price to pay in order to become debt free.
# 2: The credit counseling companies can often charge high fees:
As said, when entering consumer credit counseling services, these companies can often charge high fees. The fees will often range depending on the creditors owed, balance and state amongst several other variables. When considering credit counseling, it’s usually only beneficial for consumers with high balances. Paying monthly administrative fees when the balances you owe are so low, is not all that beneficial. But then again, if you were making a two hundred dollar payment and a majority of that was going towards interest and late fees, it may be in your best interest to consider credit counseling. It never hurts to go through a free quote to weigh what you were doing vs what credit counseling can do.
How a credit counseling service can relieve your stress:
We’ve all been there and dealing with credit card debt can be extremely stressful. Making minimum payments only to see them not go towards your actual balances but instead, having them applied towards finance charges and interest can be extremely bothersome. The purposes of these programs are to lower your minimum payments, interest rates and giving you the flexibility of having one easy payment. While reducing the stress factors of high minimums, high interest and various monthly obligations, you’ll be able to focus more on your personal life as opposed to stressing on credit card debt.
These consumer credit counseling services were created with the intentions on helping consumers pay more on the actual balances owed and less on interest, just make sure you select the right counseling agency. The typical length in a consumer credit counseling service can vary anywhere from two to five years depending on the consumers debt amount and creditor type. It’s always a good idea to go through a consultation to see if these programs can help reduce finance charges, to bring your financial life back on track. When considering methods of debt relief, it’s always a good idea to stay away from bankruptcy and settlement offers seek out a credit counseling service in order to become debt free.