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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.
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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.
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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.
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