Most people find themselves in need of professional credit counseling when their finances take a nosedive to the worse. Here are frequently asked questions and answers that can guide in regards to credit counseling.
1. What is Credit Counseling and how would I know I am in need of one?
Credit counseling, or debt counseling, is a process wherein a consumer goes through which educates him on how to handle all the debts he has incurred, revamp his spending habits, and solve the unending financial problems he is facing at the moment. If you find yourself unable to find a solution to all your financial woes at this time with all the creditors harassing you to pay your existing debts, it is time for you to go for credit counseling.
2. What does credit counseling involve?
Once you go in for credit counseling, your financial information will be asked. This is for the purpose of getting a clear picture on where you stand. They need you to give them a copy of your total monthly income from all sources, all your expenses each month in detail, the current balance of all your accounts, the minimum payment of your debts, and the interest rates of each of your existing accounts.
Once they gather all the important information, the credit counselor will then come up with a debt management plan wherein all your accounts will be customized in a way you can manage to make the monthly payments regularly. This plan will then be sent to all your creditors for approval. Once they approve of this, you are expected to send in a consolidated payment each month to the counselor, and in turn, he will be the one to appropriate payments to all your creditors.
3. How can credit counseling help me with my debts? Will it improve my credit report?
Getting help from credit counseling will certainly be good for you. In fact, it is a way for you to repair your credit.
You get to handle your debts better. You are able to pay your accounts every month because the amount you owe is more manageable. You only have to focus on the consolidated monthly amount to be paid and let the counseling agency be the one to send in payments to all your creditors. As you maintain your monthly payments, this will cause a positive effect to your credit report. Although there are also instances wherein creditors will shy away from offering you credit in the future because you are in credit counseling, but others will see this as a good sign that you are taking responsibility over your financial situation.
4. How much should I pay for credit counseling?
In a nutshell, you are expected to pay the maximum or less than 20% of your consolidated monthly payment. The monthly amount you pay should not be more than the total monthly payments you make before you went into credit counseling. After all, this is precisely the reason why you are in need of counseling and that is to lower your monthly payment and make it more manageable. Be sure that you know how much of the consolidated amount you send in every month goes to counseling fees.
There are non-profit credit counseling being offered, but you have to be sure to check what other “fees” they collect. Some would ask for donations and/or voluntary contributions. Just be sure that the amount you are giving is reasonable and will not put you in more debts.
5. How do you choose a credit counseling agency?
There are telltale signs that you have to be conscious of when choosing a credit counseling agency. Remember, there are scams everywhere. These are people taking advantage of your bad financial situation to get more money from you. If you are to choose a credit counseling agency, be sure to check if they are listed with the Better Business Bureau. Their services should also be handled by the Certified Consumer Credit Counselors who meet the highest standard and has passed the counselor certification exams.
These are just some commonly asked questions in regard to credit counseling.