Consumer Credit & Debt Counseling Services
 
 
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Consumer Debt Counseling


Being in debt isn't fun. Having to file for bankruptcy protection is even less so. Ideally, you'd like to repay your creditors, but you're just not sure how to go about doing that. This is where consumer debt counseling can help. Consumer debt counseling works a bit differently other kinds of debt reduction strategies you've probably tried. You won't be consolidating debts, you'll be focused on reducing the overall debt, bringing your accounts current, and getting out of debt as soon as possible.


Closing All Open Accounts

 

The first step in a debt management plan is to contact an agency that specializes in this specific process. A debt counseling organization will act on your behalf to close all of your existing accounts. An agency is able to do this because it has established good relationships with thousands of creditors, yours included. Once you hire a debt counseling firm, your payments to creditors are stopped, you don't owe any money to your creditors, and instead you start making payments to the debt counseling organization.

Lowering Rates & Payments

 

A very attractive feature of debt counseling organizations is the fact that your payments can be cut by up to 50 percent. In most cases, 10 to 20 percent is what you should expect though. Even still, a reduction in your monthly debt payments of even 10 percent is impressive. It means that, for every $100, you only make $90 in payments.

On top of that, your interest rate is often cut dramatically. Instead of paying 10 percent, you may only pay 9 or 8 percent interest on your debts. Over the life of your loans, this would save you a substantial amount of money in interest charges. Imagine being able to cut several thousand dollars of interest from your current debt. That alone would make your burden much smaller than it currently is now.


Bringing All Accounts Current


You may be behind on your payments. That's fine. A debt counseling organization transfers your payments away from your creditors and accepts your money on behalf of your creditors. In doing so, it attempts to establish a good payment record that it can then show to your creditors. For example, if you are currently three months behind on your loan payments, a debt management organization may tell you to pay just 80 percent of your current monthly loan payments to the agency. Then, after three months of on-time payments, your accounts will be brought current with your actual creditor.

Debt counseling firms are able to do this through a process called "reaging." Basically, the agency negotiates with your creditors to lower your total debt amount. This, in turn, changes the minimum monthly payments (i.e. it lowers it). By making the payment outlined by the debt management organization, you are actually making more than the newly negotiated payment plus an additional amount to bring your accounts current. All of this happens behind the scenes, but would be impossible without the negotiating power of the debt counseling organization.


Paying Off Debt

 

Obviously, the end-game is to pay off the debt. It's all fine and dandy to reduce your monthly payments, but there has to be an end in sight. Fortunately, paying off your outstanding debts can usually be accomplished in a much shorter time since the total debt amount has already been reduced, along with the interest rate. As long as you faithfully continue making payments to the debt counseling organization, it will keep sending them to your creditors. Before you know it, your debt is repaid.

 

Education

A good debt counseling organization doesn't stop with debt elimination. Money management, and budgeting, education is the final step in the process. You already know what it's like to get in over your head. What a debt counseling organization should do for you is educate you so that you'll never find yourself in need of its services ever again.