Most people underestimate the benefits of credit counseling. When we think of credit counseling, most of us might be too embarrassed or ashamed to talk to a credit counselor. It’s not an easy task to openly talk about your debt problems. Most people are afraid to be judged, but in reality, you’re in the same boat as millions of Americans.
If you find yourself overwhelmed with credit card debt, you might want to consider credit counseling. Credit counselors will take a close look at your finances, help you budget, give you advice on how to reduce your spending, and in some cases, enroll you in a Debt Management Program (DMP). Be open about your finances, credit counselors speak with over a dozen consumers a day who are in the same position are you are!
Some people seem to think that credit counseling programs are too expensive. As a matter of fact, it doesn’t cost you anything to make an appointment for a consultation. The only costs that are involved is if you decide to enroll in a DMP. There might be an initial enrollment fee of $50 or less, but this can usually be negotiated. The other fee is a monthly servicing fee which shouldn’t be more than $30/month.
Benefits of Credit Counseling
- Reduced Interest Rates- Credit counselors and creditors work together to help you lower your interest rate and payment. The interest rate can be anywhere from 0-15%, but of course this all depends on who your creditors are. Your creditors will close your account, so you won’t be able to use them in the future. This shouldn’t be a problem if you’re serious about getting out of debt right?
- Structured Payment Plan- One of the great things about a DMP is that you’ll have a set payment for a set number of months. This allows you to create a realistic budget every single month, without guessing how much your monthly payments are going to be for the following month. These plans don’t last more than 60 months.
- Stop Late Fees- Your creditors will agree to stop all late fees from accumulating upon enrolling in a DMP. Nowadays, late fees average about $35 per transaction!
- One Monthly Payment- If you have multiple credit cards, your credit counseling company will take one monthly payment for you and disburse it to your creditors accordingly. You now have the convenience of knowing exactly how much money will be taken out every single month.
It’s also important to understand some of the drawbacks associated with credit counseling. When creditors decide to close your account, your credit score can be affected. You will also have a notation on your credit report stating that you’re in a credit counseling program. Although this does NOT have an affect on your credit score, some creditors might view this as a derogatory remark.
At the end of the day, there obviously has to be a tangible benefit. Make sure the credit counseling company is listed with the BBB, and you can also read how to choose a reputable credit counseling company. Credit counseling is a great way to get your finances back on track if you need a little extra help in lowering your payments.