What You Should Know About Consumer Credit Counseling
Services
Consumer Credit Counseling services are
viewed by many as a favorable alternative to bankruptcy. Most of
them promise to get consumers completely out of debt in 5 years or
less. These programs can be helpful if the consumer can make the
monthly payment on time and if the credit counseling service follows
through with the promises it makes to the consumer.
If you are considering
signing up with a credit counseling service, there are a few things
you should know. Whether or not they are a non-profit agency, many
credit counseling services charge a substantial upfront fee that is
not applied to the consumer's debts. This fee can be hundreds or
even thousands of dollars. Additionally, credit counseling services
usually charge a monthly fee that is not applied to the consumer's
debts.
Before signing up with a credit
counseling service, read the contract thoroughly so you'll
understand exactly how much the program will cost you. Also, it is a
good idea to get the monthly payment amount in writing and to make
sure that the payment is an amount you can afford. It doesn't matter
if a credit counseling service gets your interest rate lowered and
eliminates your fees if they charge you more for their service than
you save. Also, note that credit counseling doesn't work the same
way as debt consolidation.
If you are having difficulty coming up
with your minimum monthly payments, then a credit counseling service
may not be right for you. The monthly payments through credit
counseling are usually higher because the goal is to get you out of
debt at an accelerated rate.
A common complaint about credit
counseling services is that some of them don't make the consumer's
payments on time. This results not only in late fees but also
results in a damaged credit rating. Most credit counseling companies
report your enrollment with them to the credit bureaus, which is
also bad for your credit rating.
Many credit counseling services are
actually working more for your creditors than for you. These
companies get a commission from your creditors, plus they charge you
a monthly fee.
It is advisable to shop around for the
best program if you believe that a credit counseling service could
help you. Beware of companies that won't allow you to review the
contract and won't give you the figures in writing. Also, beware of
high pressure sales tactics. If you feel you are being pressured,
that company is not the right one. Check the Better Business
Bureau to see if a lot of complaints have
been made against the company you are considering.
