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.
