If you are deep in debt and are unable to find ways and means of getting out of it, you would typically seek the help of a debt counseling service (also known as credit counseling services). This service is provided by credit/debt counseling agencies and debt management companies. The debt counseling services are offered on telephone, Internet and in local offices, and one must give preference to the one that offers services in-person.
Choosing the right debt counseling service is important
Debt counseling services educate consumers on managing debt and help them get out of debt. Some debt counseling agencies also offer complete debt management services, wherein they help the debtor in repayment of his/her debts by designing a structured plan. More than that, once you are out of debt, good debt counselors will also guide you on how to manage your finances so as to prevent yourself from getting into debt yet again. So, if you choose a good debt counseling agency and go with their recommendations, you could live a debt free life.
While you are searching for a debt/credit counseling agency, in order to make the correct choice, you need to find out the services they offer, their success ratio, and the measures they will take to safeguard your personal information. This is the minimum that you should be checking when looking to avail the services of a credit counseling organization.
Make sure that the debt counseling agency has professional and qualified counselors. Note that the debt counseling agencies are controlled and must be licensed. So, ensure that the organization is accredited to either (or both) the National Foundation of Credit Counseling (NFCC) or the Consumer Credit Counseling Agencies (CCCA).
Like everything else, the best way is to seek recommendations from friends and family who might have used a debt counseling service and found them to be good.
Advantages of using debt counseling services
There are many advantages of debt counseling services. Let’s take a quick look at how debt counseling might be of help to you:
- Debt counselor will introduce you to various ways of saving money so that you can repay your existing debt.
- The debt counselor will negotiate with creditors the interest rates and late fees thereby reducing the total amount of debt to be repaid.
- The debt counselor will also assist you in dealing with harassing creditors.
- The debt counselor also helps you with legal matters and makes you aware about your legal rights.
- The debt counselor will make you aware of crucial financial issues to be kept in mind while you are stuck in a financially critical situation.
- The debt counseling services will help you avoid bankruptcy and will always try to find a way out other than bankruptcy e.g. debt consolidation.
Disadvantages of debt counseling services
- One needs to be aware that agencies offering debt counseling services might charge some fee for the services they offer. This fee can be in the form of application fee, enrollment fee etc which can increase your financial burden. In order to avoid enormous fee, you can use the services of a non-profit debt counseling agency. However, you should surely check the credentials of the non-profit debt counseling agency before using its services.
- Besides the fee, there are a few other disadvantages of debt counseling services. Sometimes your monthly payments are reduced by spreading them over a longer repayment term; and due to longer repayment period, the total amount of interest you pay might be higher than what you would have otherwise paid. You can also suffer losses if your debt counselor is not competent enough. Moreover, taking help of a credit counseling agency can negatively impact your credit score.
Thus, before taking help of debt counseling services, you need to keep in mind all the positives and negatives. And once you decide to use these services, you must take some initiatives on your own too e.g. reduce your day-to-day expenditure in order to meet living expenses and repay debt. Gradually, you will be able to repay your debts and get rid of your financial problems.