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The Benefits of Credit Counseling in Mending Finances

Published November 3, 2011

When people want to control their debt and get familiar with the pitfalls of accumulating too much debt, credit-counseling organizations offer them proper guidance. A credit counseling company is the one, which helps people to get rid of huge piles of debt through counseling and education.

Defining Credit Counseling Services:

According to Federal Trade Commission, a reputable credit counseling organization is the one, which advises the consumers on money and debt management, instructs them with the development of budget and offer free educational material and workshops, which would help to solve their financial problems.

The agency would assist the borrowers with a better, more affordable, debt repayment plan by creating a workable budget, waiving off charges and fees, and make negotiations with the creditors.

Types of Credit Counseling Services:

The structuring of credit management services is into for-profit or not-for-profit organizations. The differentiation between both these types is given below:

  • For-Profit Credit Counseling

For-Profit agencies work for their own interest by charging customers with inflated fees, coupled with poor services. The amendments of FTC’s Telemarketing Sales Rule prohibit for-profit credit counselors from charging or collecting fees before the settlement or alteration of the debt situation.

  • Not profit Credit Counseling

Not-for-profit, or non-profit organizations, charge lesser fees than for-profit organizations. Many Non-profit organizations also offer free of cost counseling sessions and provide charge free debt management plan.

Modes of Credit Counseling:

You either can get counseling help from traditional counseling agencies or can seek financial support from online means. The difference between these two forms is:

  • Online credit counseling services

U.S. Justice Department acknowledges online credit help services as the most convenient form of counseling. As the internet media is raging, over 3.2 million consumers took advantage of financial counseling in 2010 through online programs.

  • Traditional counseling services

Traditional counseling programs, which include face-to-face sessions with the counselor, have lost their luster as the internet is taking over. They are still quiet helpful when one wants to go in depth about the operation of the firm.

Why Do You Need Credit Counseling Services?

Credit counselors can make all the financial worries drain through a slow and steady process. If you are stuck at a dead-end debt crisis, the credit analyst will improve your situation to get you back on track. The basic functioning of the credit counseling agencies is to reduce your debt through:

  • Lowering interest rates on credit card debt
  • Elimination of late fees and additional charges
  • Reduction of amount of debt settlement
  • Consolidation of loans into one monthly payment

You can think of taking professional help, credit counseling agencies offer huge compensations to debtors.

Benefits of Acquiring Credit Counseling Services:

As stated above, credit counseling helps the lenders to payoff the debt and alerts them to avoid high-unpaid debts. If you want to manage your debt, here are some of the many benefits offered by the credit counseling organizations:

  • Maintaining a Good Credit Score:

Having a good credit score is essential to get a loan of 0% interest rate, but people with debt are associated with bad credit scores. Credit counseling services help to retain a good credit score and help build up credit ratings for those who lag behind in the payment of their debts.

  • Making Repayment Plan with the Creditors

Credit counseling services are important as they make negotiations with the creditors and make a debt management plan for the clients. Dept management plan entails reduction of payments, and easier pay back amounts with a systematic interest rate.

  • Reduction in Interest Fees

Another benefit of acquiring credit counseling services is to provide lower interest fee charges on the credit card accounts. The annual percentage can reach up to 5-10%. This helps to reduce the overall debt amount and makes the payment simpler.

  • Transferring Big Bills into One

Credit counseling services also helps you to convert overwhelming interests and bills into one manageable payment monthly, with the help of bill consolidation.

  • Getting Rid of Creditors’ Harassment

If you are fed-up of the constant harassment from the debt collection agencies, then credit counseling is your rescuer. These services deal directly with the collectors and so, put an end to any direct contact with the clients.

  • Getting New Credit

You can also opt for credit counseling services when your application for the new credit has faced rejection. Counselors negotiate with the lenders to get your applications approved.

  • Better Financial Management

Counseling agents not only offer debt relief, but also are significant when you want guidance for budgeting and financial stability. You can learn how to maintain your income and allocate your money according to the needs.

In conclusion, credit counseling greatly helps people to maintain a good credit score. It is a basic step, which avoids incurring debt situations with the introduction of feasible budget plans. Today, millions of Americans are in the efforts to get the perfect credit scores, for which, credit counseling is the best option.

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