Introduction
According to the Federal Reserve Bank, Americans carry more than $850 billion in credit card debt. Whether it’s due to rising costs of living, unpredictable financial events, stagnating income levels, or uncontrolled spending, many people find it hard to pay off their credit card debt. However, considering the high interest rates lenders are allowed to charge in the event of default, dealing with your credit card debt should a matter of outmost importance. One of the best ways to do this is through counseling credit debt program.
Definition
If you have heavy debt obligations that may seem unresolvable on your own, then using a debt relief program may just be the right option for you. Counseling credit debt is a debt relief programs that starts with an in depth review of your financial status. Once your case has been review and found wanting, your credit counselor will suggest that you enroll for a debt management plan (DMP). Through a DMP, the credit counselors will request for interest rate concessions from your creditors, with the aim of achieving lower interest rates and lower monthly payments on your behalf.
How It Works
Through a counseling credit debt program you will be able to consolidate your debt, by making one payment directly to the credit counseling agency which then distributes that payment to your different creditors. It is important to note that you will still pay 100% of your debt through the program, but with slightly lower and manageable payments. Most debt counseling programs will run for a period of 5 years. Enrolling for a debt counseling program will not have an effect on your FICO score.
Tips and comments
There are many counseling credit debt programs available in the market today, each with its own pros and cons. Therefore, one should consider all the available options and choose one that fits their particular financial situation. Here are some of the factors to look out form, while searching for a debt management program.
The Type of Credit Counseling Company: There are two basic types of counseling credit debt companies, for profit and non-profit companies. While both types of companies work with different types of business model, they do aim to offer similar level of services. Before signing up for either program, make sure to confirm what services they have to offer to their clients, the fees they charge, whether they have the qualifications and license to provide their services in the state, privacy of information agreements, and their compensation fees.
The Parameters of the Debt Management Program: It is advisable that you read through and understand all the parameters to which a counseling credit debt program is bound to. Some of the issues you need to look into include the method used to compute your monthly payments, how you can review the status of your accounts, whether the program will negotiate for a lower interest rates and other fees, confirm the debts that will be covered by the program, and how signing up for the program will affect your credit.
