Credit counseling is a financial service that educates customers on how to pay off their debts with ease and how to live a debt free life. Counselors discusses your financial situation with you and prepares a personalized plan to help you in solving your money problems. Below are some of the reasons why you need the services of a counsellor.
There are quite many scam counseling agencies out there. the general rule is when someone promises you something that is too good to be true, its a scam. the easiest way to make sure you don’t get conned is to do business with a counseling agency that is fully accredited by the national foundation for credit counseling (nfcc). then you run the name of the agency through the better business bureau (bbb) to ensure that they have a positive rating.
There countless benefits you can get from credit counseling which includes:
• Reduced interest rates
• Reduction of monthly payment
• Installment payments of multiple debts in one payment.
• Eliminating financial charges.
• Relief from collection agencies.
• You get a plan that will help in paying your debts in less than five years.
Credit counseling doesn’t count against your credit history, but you can suffer a little hit on your credit score, because it is required of you to close all your credit card accounts. When you close all your accounts , it simply means that you credit score will drop. The good thing about this, your get a boost on your credit score as the result of making payments on time and reducing your credit usage.
It is very important to remember that if you plan on buying a house, car, boat , get a student loan during your time on the program, you have to pend all those plans, because people who are undergoing credit counseling are not allowed to mention all the above items.
Now that you know the risks and rewards, you can see that credit counseling isn't right for everyone. my recommendation is that you consider credit counseling if you have more than 20% of your take home pay going to unsecured debt (like credit cards) and you’re having trouble making the payments.
if you're in a situation where you feel hopeless or overwhelmed with debt, then this is something i would recommend to you.
1. You will be booked for an appointment with a counselor, where you will give the full details of your financial situation. these will help them in creating a detailed budget for you.
2. A request will be made to pull your credit report, so they can know where you stand financially.
3. Your current credit score will be provided for you and reviewed with you.
4. They will help you in developing a debt management plan, to get your debt paid off in 5 years or less. they sometimes reduce your monthly interest rates or reduce your monthly payments rate or vice versa.
5. You are allowed to decide to accept the debt management option, or you go your way.
6. If you take the debt management plan, they will help you in implementing the plan.
Credit counselors always ask lots of questions about your expenses, debt, total income, so be sure to have4 the answers beforehand.
• Income – you should be able to provide your last paycheck for each source of income and make sure it shows the total income earned, amount withheld and complete take home.
• Current debts – you should have a prepared list of loan terms for any mortgages, student loans, auto loans and any other loans you might have.
• Credit card information – you should organize your credit card details with current balance, due dates and interest rates.
• Monthly expenses – calculate how much you spend monthly on all your expenses, from groceries, cell phone, insurance, subscription and every other thing you pay for every month.
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