Understanding the Connection between Debt Consolidation and Consumer Credit Counseling
You’re up to your ears in credit card debt and want a debt consolidation loan to lower your payments and streamline debt management. Unfortunately, it can be difficult to find a debt consolidation loan unless you’re willing or able to put up your home or car for collateral. Paying off debt with an affordable repayment plan through consumer credit counseling can be a welcome alternative to pricey unsecured debt consolidation loans.
Consumer Credit Counseling: How it Works
Non-profit consumer credit counseling services offer a package of services for a fee. In some cases, their fees are based on your ability to pay as determined by a review of your income and debts. Paying a fee to get out of debt often makes more sense for debt ridden consumers than paying more interest on a debt consolidation loan. Here’s a general picture of how credit counseling services work; policies and procedures vary.
- Initial interview: When calling for an appointment, you may be asked several questions about your situation, but legitimate credit counselors never ask for credit card information over the phone. They provide instructions about the financial documentation you need to bring to your appointment. Prepare this information well before your appointment in case you find that some of what you need is missing.
- Your debt consolidation and repayment plan: Your credit counselor reviews your income, assets, and unsecured debt obligations. This information is used to determine your eligibility for a debt repayment plan. These plans are set up according to your ability to pay and requirements of your creditors. Your credit counseling agency acts as an intermediary between you and your creditors. Your counselor attempts to negotiate lower finance charges and fee waivers, but usually cannot lower the balances you owe.
- Signing your debt away and cutting up your plastic: Once your credit counselor has determined the terms of your repayment plan, you review it and are asked to sign an agreement. As part of the agreement, you destroy your credit cards and close your accounts. This is a difficult step for many, but it ensures that you won’t sabotage your repayment plan by incurring more debt.
- Debt consolidation: You make scheduled payments to your credit counseling agency and they distribute funds to your creditors according to your agreement. You gain the dual benefit of debt consolidation and lower, less costly repayment terms. Congratulations!
Consumer credit counseling can be a beneficial alternative to unsecured debt consolidation loans. Contact a credit counseling service to learn more.
(No Ratings Yet)
Loading ...Consumer Debt: Obstructing Recession Recovery?
Writing for Forbes Magazine, economist Desmond Lachman asserts that those forecasting the end of the US economic recession are “grossly underestimating the negative impact of falling household incomes and household de-leveraging upon US consumer demand.” Mr. Lachman believes that US consumers are withholding purchases due to worries about their jobs and lack of available credit resources. He also cites Americans’ high debt levels and losses associated with plunging home values and loss of home equity. Although mortgage rates remain relatively low, potential homebuyers may be putting of buying a home until they have more confidence in long term financial security.
Ditching Your Debt: Consumer Credit Counseling Can Help
If you’re scraping along each month by making minimum payments on several credit card accounts, you’re not alone. As of the end of 2008, US households holding at least one credit card owed an average of $10,679. Consumer credit counselors can assist with eliminating debt in the following ways:
- Budget counseling: Credit counselors carefully review your monthly gross income and expenses including housing payments, living expenses, savings, and credit card debt. Based on information you supply, they’ll provide a cash based budget for meeting your needs and paying off debt.
- Repaying credit card debt: Credit counselors can negotiate with your credit card companies to arrange and affordable repayment agreement. These plans can last up to five years, and may include waivers or reductions of interest, late fees, and other charges that would otherwise add to your debt.
- Debt consolidation: When your credit counseling service establishes the terms of your debt repayment agreement, they’ll provide you with a written agreement outlining the terms, dates, and conditions of your repayment agreement. You will make one monthly payment to your credit counseling service, and they will deduct their service fee and distribute the balance to your creditors according to the terms of your repayment agreement. This reduces debt management from a confusing pile of paper to a streamlined process of writing one monthly check to your credit counseling service.
Evaluating Credit Counseling Services
First of all, there are a few things that credit counseling services cannot do. They cannot “fix” your credit reports or remove negative reporting information. It’s also important to know that although credit counseling services may help you resolve your credit card debt problems, they cannot guarantee that you’ll qualify for new credit after your debt management plan is completed.
When choosing a credit counseling service, please be aware that there are legions of scams and unscrupulous opportunities for getting ripped off. Avoid any service requesting advance payment, or that offers assistance without reviewing your financial situation first. Stay away from services offering “overnight credit repair” or “instant results” There is no legitimate way to improve your credit standing without investing time and hard work.
(No Ratings Yet) Loading ...Credit Counseling: Managing Credit Scores
Some parts of recent legislation concerning consumer credit cards went into effect August 20:
- Instead of mailing bills at least 14 days before their due date, credit card issuers are now required to mail bills a minimum of 21 days before their due date.
- Credit card issuers must provide consumers an option for declining interest rate increases. If the new interest rate is declined, consumers have five years to pay off their credit card balance. No new charges may be made after opting out of the new interest rate.
- Credit card issuers are allowed to adjust minimum payments to ensure repayment of the balance owed by opt-out customers within five years. If you opt out of a higher interest rate, this could significantly raise your minimum payment amount.
In other news concerning credit cards, a study by FICO, the company that provides the most commonly used system of credit scoring, indicates that credit card issuers reducing consumer credit lines has varying effects on credit scores. FICO reports that between October 2008 and April, 2009, approximately 33 million consumer credit lines were reduced by credit card issuers, including 24 million customers with no obvious “triggers” for reducing credit. About 3.5 million customers experienced little impact on their credit scores, while about 8.5 million reported a drop in their credit scores after credit limits were reduced. Surprisingly, 12 million credit card customers saw their credit scores increase after their credit lines were cut. Mixed results may occur from variations in individual circumstances.
High Credit Card Debt = Lower Credit Scores
Credit experts usually recommend that you keep about 70 percent of each credit line available. Running up cards to their limits can put you at a high risk of missing credit card payments if you lose your job or become ill. If you’re carrying too much debt and need help, using a credit counseling service may help with reducing credit card debt. Here’s how credit counseling can help:
- You’ll review your financial documentation including income, obligations, and your credit history with your credit counselor.
- Your credit counselor will help you establish a cash based budget, and will contact your creditors to negotiate affordable repayment terms based on your ability to pay.
- You’ll sign an agreement or contract with the credit counseling agency that details the terms of your repayment plan, specifies payment amounts and due dates, and other terms and conditions of your credit card debt reduction plan.
- As with debt consolidation, you’ll enjoy the benefit of making one monthly payment instead of juggling bills and incurring charges for late payments.
When considering credit counseling companies, avoid paying “up front” for services, and don’t fall for promises of “instant” credit repair; it’s easier getting into credit card debt than resolving it.
(No Ratings Yet) Loading ...Consumer Debt Declines for Fifth Consecutive Month
The Federal Reserve reports that consumer debt decreased in June, which represents the fifth consecutive month of declining rates of consumer borrowing. This suggests both good and bad news, as some consumers voluntarily curtail spending while others are being denied credit. The Fed suggests that borrowers who are spending less and saving more contribute to economic recovery as their household budgets stabilize.
Controlling Credit Card Debt
Buying what you can’t afford with money you don’t have can lead to trouble, especially as layoffs, corporate downsizing and prolonged unemployment continue. As consumers continue to worry about the economy, they’re either deciding to go without and pay down debt, or buying power is being curtailed by lenders that “just say no” to granting or extending consumer credit. This combination of consumer and lender reluctance seems to suggest that now is as good a time as any to declare your freedom from depending on credit cards for everything from groceries to Gucci. Debt consolidation is a first step toward becoming debt free.
Debt Consolidation: Three Methods
Benefits of debt consolidation include streamlining debt management and possibly reducing finance charges and monthly payment amounts. Getting unsecured personal loans for debt consolidation can be difficult, so here are alternative methods for consolidating debt.
- Credit card balance transfers: Although many credit card companies are cutting credit lines and refusing new credit, they continue to promote transferring balances from competitors’ cards. Balance transfers can help you clean up multiple small balances, but beware of transfer fees and hidden costs.
- DIY Debt Consolidation: If you have problems with compulsive spending, or spend more than you can afford, you can sabotage a debt consolidation plan. DIY debt consolidation requires listing all of your debts and paying them off one by one. Continue making minimum payments on all of your debts except the debt with the highest APR, which means it’s the most costly. When the highest APR debt is paid off, you progress through your debts by “rolling over” the amount you were paying on the first debt to the second, and so on. Keep records and review them monthly. Seeing your debt decrease each month can help you avoid overspending.
- Getting Debt Help: Contact a credit counseling service for help if you doubt your ability to control spending. Credit counseling services help you formulate a cash budget and can also negotiate affordable repayment plans with creditors. Credit cousneling agreements require you to close your credit card accounts, and they cannot guarantee tht you’ll qualify for new credit after your debt repayment plan is completed.
- Avoiding More Trouble: Refuse unsolicited offers of debt help, and check references when seeking debt assistance. The National Foundation for Credit Counselors (NFCC) can help you locate an accredited credit counseling service in your area .
Getting your finances on track by eliminating debt can help you plan for a future that includes financial security and peace of mind.
(No Ratings Yet) Loading ...Consumer Credit Counseling: Five Tips for Success
If you’re drowning in credit card debt, you know it eats away at more than your wallet. Sometimes a helping hand is all you need to gain freedom from credit card debt. Consumer credit counseling services typically provide services including debt consolidation, acting as an intermediary between you and your creditors, and negotiating affordable repayment plans that may include waived or reduced fees and interest rates. Credit counseling services typically do not negotiate reductions in the balances owed.
The Federal Trade Commission (FTC) has recently announced increased law enforcement efforts against scams targeting people facing financial hardship and or mortgage foreclosure. This emphasizes the need for carefully selecting your credit counseling service.
- Dont Accept Unsolicited Offers of Help: If you’re past due on payments or if your home is in foreclosure, you may receive phone calls, snail mail, and email offering “help”. By taking the initiative to contact consumer credit counseling agencies, you can lessen the chance of encountering scammers.
- Shop and Compare Credit Counseling Services: When contacting consumer credit counseling services, make notes about their fee structure, services provided, and professional affiliations.
- Understand the Process, and its Limits: Consumer credit counseling services review your monthly income, living expenses, debt payments, and work with your creditors for establishing an affordable repayment plan through debt consolidation; you’ll make one monthly payment to your credit counseling service, and they distribute funds to your creditors. Depending on the amount of debt you have, repayment may take a few years.
- Consumer Credit Counseling and Your Credit: Your credit counseling program cannot erase negative credit reporting that occurred before you started your credit counseling repayment plan. Creditors generally agree to report payments made on a consumer credit counseling repayment plan as “paid as agreed.” You will be asked to close your credit card accounts as part of the terms of your repayment agreement. Credit counseling agencies can help you get out of debt, but they cannot guarantee that you can qualify for new credit after completing your repayment plan. Avoid doing business with any debt help service that makes promises or guarantees about getting new credit or “fixing” your credit reports.
- Honesty is Key: Consumer credit counseling services will ask for extensive financial information. It’s in your best interest to cooperate fully and quickly with their requests. Don’t try to hide income, lie about your debt, or conceal credit cards. Your success depends on an honest and potentially longstanding relationship with your credit counseling service. Your success will only be as good as the information and cooperation you provide.
Avoid dwelling on past mistakes and misfortunes, and focus on succeeding with your repayment/debt consolidation plan. The effort you invest will be worthwhile and can help you prevent the consequences of filing bankruptcy.
(No Ratings Yet) Loading ...Consumer Credit Counseling Relieves Debt Stress
Recent reports of credit card companies increasing charges to consumers and the possible role of debt stress in the death of singer Michael Jackson highlight struggles associated with carrying large amounts of debt. Dealing with seemingly insurmountable debt can negatively impact all aspects of your life. If you can’t see the light from beneath a mountain of credit card debt, consumer credit counseling services may be able to help.
Credit Card Debt Consolidation Through Consumer Credit Counseling Services
Credit counseling services typically offer debt consolidation by working with you and your creditors to develop an affordable repayment plan. Instead of paying several credit card bills each month, your credit counseling service charges you one monthly payment amount based on the terms of your repayment plan and the service charge for the credit counseling service. Benefits of using a consumer credit counseling service include:
Waivers of late fees, overlimit fees and reduced interest rates: Consumer credit counseling services neogitiate fee waivers and reduced rates that enable you to pay off debt faster and at less expense.
- Make one monthly payment: Your credit counselor can help with debt management through a debt consolidation /repayment plan. The credit counseling service pays your creditors; this reduces your risk of damaging your credit score with late or missed payments.
- Eliminate or reduce calls from creditors: Depending on arrangements made with individual credit card companies, consumer credit counseling services usually communicate with creditors on your behalf, and ask that you refer creditors or collection agents to them.
- Track your progress: Consumer credit counseling agencies typically provide statements showing how your payments are applied and document progress toward paying off your debt. Seeing your progress can help keep you motivated.
- Signed agreement: Consumer credit counseling services provide a written contract or service agreement that discloses the terms of your credit card debt consolidation plan and specifies payment amounts and due dates along with other terms and conditions.
Consumer Credit Counseling Services: Things to Consider
Credit counseling services provide prorams designed to expedite getting out of credit card debt, but it’s important to understand their requirements.
- Closing your credit card accounts: As part of their agreement with credit card companies, consumder credit counseling services require clients to close their credit card accounts as part of their debt consolidation agreement.
- No magic “fix” for credit reports: Consumer credit counseling agencies cannot alter credit reporting for events that occurred prior to enrolling in your credit card debt consolidation plan. If you’ve made late payments, or otherwise defaulted on credit card accounts, this information remains on your credit reports.
- Buyer beware: Choose consumer credit counseling services with care. There are plenty of scams out there; if something sounds too good to be true, look elsewhere for help.
Get started with credit card debt consolidation today and leave debt worries behind.
(No Ratings Yet) Loading ...The For-Profit vs. Non-Profit Consumer Credit Counseling Battle Continues
Pennsylvania’s State Legislature is poised to pass a bill that would allow for-profit companies to offer credit counseling services in the state. Those opposed to the bill claim that it will lead to consumers being advised to enter into debt management programs when its not appropriate.
Patricia Hasson, president of the Consumer Credit Counseling Service of the Delaware Valley, claims that consumers are best served by non-profit firms according to a Philadelphia Daily News article. She explains that “disinterested” parties, such as non-profits, are more likely to explore other options for a consumer prior to entering into a debt management program.
Supporters of the bill claim that the legislation will bring more credit counseling and debt consolidation choices to consumers as well as licensing and consumer protections to the industry.
(2 votes, average: 5 out of 5) Loading ...- This blog covers a wide variety of debt consolidation and loan topics.
We rely on a large network of financial experts and leading authors to write the content for the DebtHelp.com Blog.
Debt Consolidation Loans: Pros and Cons
Bankruptcy Has Repercussions for Years
Credit Card Debt Levels Fall in September; Fees and Rates Rising
- November 16, 2009–November 22, 2009
- November 9, 2009–November 15, 2009
- November 2, 2009–November 8, 2009
- October 26, 2009–November 1, 2009
- October 19, 2009–October 25, 2009
- October 12, 2009–October 18, 2009
- October 5, 2009–October 11, 2009
- September 28, 2009–October 4, 2009
- September 21, 2009–September 27, 2009
- September 14, 2009–September 20, 2009
- September 7, 2009–September 13, 2009
- August 31, 2009–September 6, 2009
- August 24, 2009–August 30, 2009
- August 17, 2009–August 23, 2009
- August 10, 2009–August 16, 2009
- August 3, 2009–August 9, 2009
- July 27, 2009–August 2, 2009
- July 20, 2009–July 26, 2009
- July 13, 2009–July 19, 2009
- July 6, 2009–July 12, 2009
- June 29, 2009–July 5, 2009
- June 22, 2009–June 28, 2009
- June 15, 2009–June 21, 2009
- June 8, 2009–June 14, 2009
- June 1, 2009–June 7, 2009
- May 25, 2009–May 31, 2009
- May 18, 2009–May 24, 2009
- May 11, 2009–May 17, 2009
- May 4, 2009–May 10, 2009
- April 27, 2009–May 3, 2009
- April 20, 2009–April 26, 2009
- April 13, 2009–April 19, 2009
- April 6, 2009–April 12, 2009
- March 30, 2009–April 5, 2009
- March 23, 2009–March 29, 2009
- March 16, 2009–March 22, 2009
- March 9, 2009–March 15, 2009
- March 2, 2009–March 9, 2009
- February 23, 2009–March 1, 2009
- February 16, 2009–February 22, 2009
- February 9, 2009–February 15, 2009
- February 2, 2009–February 8, 2009
- January 26, 2009–February 1, 2009
- January 19, 2009–January 25, 2009
- January 12, 2009–January 18, 2009
- January 5, 2009–January 11, 2009
- December 29, 2008–January 4, 2009
- December 29, 2008–January 4, 2009
- December 22, 2008–December 28, 2008
- December 15, 2008–December 21, 2008
- December 8, 2008–December 14, 2008
- December 1, 2008–December 7, 2008
- November 24, 2008–November 30, 2008
- November 17, 2008–November 23, 2008
- November 10, 2008–November 16, 2008
- November 3, 2008–November 9, 2008
- October 27, 2008–November 2, 2008
- October 20, 2008–October 26, 2008
- October 13, 2008–October 19, 2008
- October 6, 2008–October 12, 2008
- September 29, 2008–October 5, 2008
- September 22, 2008–September 28, 2008
- September 15, 2008–September 21, 2008
- September 8, 2008–September 14, 2008
- September 1, 2008–September 7, 2008
- August 25, 2008–August 31, 2008
- August 18, 2008–August 24, 2008
- August 11, 2008–August 17, 2008
- July 28, 2008–August 3, 2008
- July 21, 2008–July 27, 2008
- June 16, 2008–June 22, 2008
- June 2, 2008–June 8, 2008
- March 17, 2008–March 23, 2008
- November 12, 2007–November 18, 2007
- November 5, 2007–November 11, 2007
- October 29, 2007–November 4, 2007
- October 15, 2007–October 21, 2007
- September 17, 2007–September 23, 2007
Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno.
- Auto Loans (1)
- Consumer Credit Counseling (7)
- Credit Cards (2)
- Debt Advice (5)
- Debt Consolidation Options (6)
- Debt Consolidation Scams (1)
- Debt Management Options (2)
- Debt Settlement (10)
- DebtHelp.com (98)
- Economy & News (6)
- Helping Consumers (4)
- Managing Debt (3)
- Mortgage Fraud (1)
- Saving money in today's economy (15)
- Your Credit (3)
- You will recieve a reminder when we post a new article to the DebtHelp Blog.
Loading ...