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For many years now, people facing debt related problems have approached debt consolidation agencies and credit counseling companies to help them get out of their debt trap. Though most of them are clean and above board service providers, there are a number of them who murky the waters and give a bad name to all such service providers. The Internal Revenue Service (IRS) has revoked the tax-exempt status of a number of such agencies due to scams perpetuated by them.
Considering the spread of bad debts all around – with more than 80 percent of the Americans in debt – people still need the services of good debt consolidation and credit counseling services. These services help them consolidate their various debts, arrange to give them good counseling on credit and debts, and ways to manage their finances. Such services will be ready to answer a few questions about themselves, and you need to ask them:
• How long has your company been in business?
• Are you ready to give the background of your company's credit counseling and debt consolidation management team? (Look to see what kind of relevant education and experience do the members have. Check if the Credit Counselors have Consumer Credit Counselor certification.)
• Does your company receive consideration in any form from the creditors? (Consideration in any form could be an incentive to push the debtors into a Debt Management Plan – DMP – that involves repaying as much of their debt, plus interest, as possible.)
• Do you actually provide free advice on credit, and any other consultations, or do you straight away advise DMP?
• Is your agency a member of the Better Business Bureau (BBB)? (A member of BBB responds to complaints and is ready for scrutiny.)
• Is your Credit Counseling agency licensed and bonded? (As they handle your money, it is necessary in case your money is mishandled.)
You need to be cautious when approaching companies for debt consolidation and credit counseling.
Debt consolidation loans are a do-it-yourself process, whereas credit counseling helps you to make financial decisions. If you already have a financial plan, then you probably don't need the services of a credit counselor. However, if you have questions or need help with a budget, a credit counselor can offer valuable help.
What Debt Consolidation Loans Can Do For You
Debt consolidation loans can reduce the interest rate you are paying on unsecured debt, like credit cards, and lower your monthly payments. You can choose to use an equity loan with its tax deductible interest or a personal loan. Many lenders offer competitive rates, which you can find by researching companies online.
A loan gives you more control over interest rates and payment schedules than with other options. Not only can you get low rates, but you can decide to take longer than five years to pay back your principal. By taking longer, your payments are lower, giving you financial breathing room.
However, a debt consolidation loan should be part of a larger financial plan that includes budget planning and long term financial goals. If you don't have these things in place, you may find yourself in deeper financial trouble by taking out a loan.
What Credit Counseling Can Do For You
Credit counseling provides confidential financial planning for a low fee. In a non-judgmental atmosphere, a credit counselor can help you define your financial goals and plot a course to get there. They may suggest a debt consolidation loan, debt consolidation program, or other financial options. They will educate you about the pros and cons of each to help you make a decision.
Credit counselors are familiar with all types of financial programs, so they may point you to little known sources for help. They may also help you realize immediate savings by helping you to reduce expenses or lower interest rates on some of your bills.
Credit counseling is really an investment in your financial future. You get a quick crash course on your finances with practical answers. By getting expert help, you can save your credit, saving you thousands.