The process of educating consumers about debt and how it can be repaid is called credit counseling. It goes beyond mere education. Credit counseling aims to help you work out a debt management plan with your creditors (credit card companies, banks, etc. )
With the help of a debt management plan, the burden of paying off your debt is significantly reduced. Credit counselors can often work out deals between the you and your creditors to reduce fees and/or interest rates, all in the best interest of both parties.
Lately the credit counseling industry has come in for its share of criticism. Credit counseling agencies collect their fees from your lenders. So unless they get your debt repayments, they do not get paid. As a result credit counseling agencies have been accused of using predatory tactics and working as the collection arm of creditors.
While these claims may be justified to a certain extent, credit counselors can also be a huge help, provided you pick the right credit-counseling agency.
When you start your hunt for a suitable credit counseling agency, you can first go online to look up companies in your city or general area. Compare the services and rates they offer. The internet has made this task easy.
If a particular company has way too many complaints and grievances filed against it online, stay away from it. The BBB (Better Business Bureau) is one of your best friends in researching this.
Also, approach a credit counseling agency with realistic expectations. Credit counselors are not magicians who can wave a magic wand and make your $50,000 debt go away. They can merely negotiate a better interest rate for your debt, or help you cut down on unnecessary fees.
If you have too much “bad debt” (i.e., debt on cash advances, high interest rate credit cards,) it may be difficult to negotiate more favorable terms with those particular creditors.
If your debt is primarily “good” (i.e., mortgage or student loan debt,) you will find many more varied and beneficial options open to you.
Remember that enlisting the help of a credit counseling agency does not make them responsible for your debts. Ultimately you will still have to watch your expenses, take stock of your purchases, and keep up with your negotiated payments.
You can choose to get out of debt alone, or you can take the help of a credit counseling agency. Either way, getting rid of your debt is still entirely your responsibilty, with or without the help of a credit counseling organization.
The key thing a credit counseling agency can do is keep you on the right track and use their clout with your credotirs to get you a workable plan so you can finally get out of debt.