What is Credit Counseling? Is It A Good Idea For You?

Often, it has been found that the term “Credit Counseling” is misinterpreted. People think that it helps them to recover their credit points. But this is not credit counseling all about. Credit counseling mainly helps you to avoid bankruptcy as well as to escape living paycheck-to-paycheck.

It is a service that guides people who are sinking in debt and want to get relief. If you are trying to control your debt and finances, then credit counseling can help you to do so.

Credit counselors provide advice on money management and budgeting. They also help people how they approach creditors about a payment plan or settlement and go through the processes.

A Brief Introduction on Consumer Credit Counseling Service:

The term “credit counseling” was created by credit grantors in the year 1951 for promoting financial literacy and helping the consumers to avoid bankruptcy. Consumer Credit Counseling Service is a member of the National Foundation for Credit Counseling to alleviate the stress of financial problems.

There are mainly two types of credit counseling services including-profit credit counseling and non-profit credit counseling.

Profit credit counseling works for their own interest by charging customers with an inflated amount of money. Whereas the not-profit credit counseling charges lesser fees. There are many not-profit counseling services that do not charge any fee.

What Happens in Consumer Credit Counseling Session?

Once you start falling behind on loan payments, time is not on your side. If you failed to make payments in proper time, then the situation might get worse and it becomes difficult for you to get relief of your due amounts.

In such cases, a credit counselor can help you by starting a conversation to get rid of such instances. They help you to create a budget and plan to regain financial stability instantly.

After that, they will work with you and tell you the best option suitable for you. The counselors will take thirty to forty minutes and take an interview to know the detail of your debt. They might ask you about your assets, expenses, and incomes so that providing the right solution becomes easier for them.

Based on your financial goals, the counselors will tell you the appropriate plan that charges a minimal interest rate. They might also ask you a few questions about how this situation occurred and what are the assets that you sold to clear your debt.

There is no doubt that they will suggest various debt repayment strategies to you so that you can tackle your credit card and get back on your track. The experts will evaluate data and educate their clients so that they can manage their due amount.

Few people wait too long before contact with a Credit Counselor. For these people, bankruptcy is the only option that they are left with.

Credit Counseling can Help you with these Following:

  • Managing money
  • Making budgets
  • Checking your credit report
  • Designing a Debt Management Plan
  • Bankruptcy counseling
  • Using credit to your advantage
  • Loan counseling

Procedures for Consumer Credit Counselling:

The actual counseling process takes thirty to forty minutes. But if you are suffering from unmanageable debt, then the process may take up to two hours. Before going for counseling, you should gather all your financial information.

The counselors will ask you many questions regarding your debts, your regular or monthly income and more.

  • Income

You should carry the last paycheck for all the sources of income you have. Also, ensure that it contains your total income, total take-home pay and the amount of sum withheld from your account.

  • Current Debts

Before going to the counselor, be ready with a list of monthly as well as yearly payments, loan terms, and interest rates for auto loans, any mortgages, or student loans.

  • Information of your Credit Card

After that, arrange your credit card information including interest rates, present balance, and due dates that are listed with each card.

  • Monthly Expenditure

At last, you have to calculate the amount you spent each month. It includes gas, bills, groceries, cell phone recharge, electricity bills, insurance, internet bill or any subscription charges that you need to pay in every month.

Before providing all the information to the experts, you need to seek the best consumer credit counseling service in the UK to reduce the chance of fraud.

Benefits of Consumer Credit Counseling Service:

As already stated that with the help of credit counseling, you can pay off the debt and tell them how to avoid unpaid debts. Look at the advantages of credit counseling that are listed below.

  • Maintain a Good Credit Score

If you want to get a 0% interest loan, then you have to maintain a good credit score. But most people with debt failed to maintain that. In those cases, consumer credit counseling service the UK assists you to retain a good credit score.

  • Make Repayment Plans

Credit counseling services create agreements with creditors. And sometimes, it offers debt management plans to help their customers. The debt management plans set reduction of payments and make easy to payback amounts with a minimal interest rate.

  • Good Financial Management

The counselor will not only provide you the debt relief ideas, but they will also give advice regarding financial stability and budgeting. So that you can learn to maintain your income and spend your money depending upon your requirements.

  • Remove Creditor’s Harassment

Are you puzzled with spontaneous harassment and calls from the debt collection agencies? Then credit counseling service is the ultimate rescuer for you. These services deal with the collectors and it releases your stress as well.

  • Reduce Interest Rates

Apart from the above advantages, there are a few benefits as well. One of them is the lower interest fee charges. The annual interest may arrive up to five to ten per cent. It decreases the entire debt amount and makes the payment method easier.

  • Transfer Big Bills into Lesser Amount

To convert the astounding interests into a manageable payment, credit counseling service plays a major role. So that you can easily pay the bill and avoid the late fine.

Disadvantages of Consumer Credit Counseling Services:

In spite of the multiple advantages of credit counseling, it is important for you to be aware of the negative sides of it.

  • You still have to pay back the entire balance on your debt.
  • It might take longer to pay off your total debts, almost four to seven years.
  • While enrolled in consumer credit counseling services, you are now restricted to use credit cards.
  • Consumer credit counseling services charge exorbitant set-up amounts that become unbearable for some people.
  • Customers have to pay eight percent to twenty-four percent commission fee on the money that they have saved of yours in the end.