With the economy and paychecks not going as far as they used to, more people are turning to consumer credit counseling as part of their personal debt management plan. Some experts may tell you that using a credit counseling company is not the way to go and if you have less than $5K in debt, it probably is not for you.
But not all individuals are disciplined enough to pay off their debt without help from an organization that specializes in debt reduction. A credit counseling company will help you develop a budget, educate you on managing your finances and set you up on a debt management plan (DMP) that will help you get your unsecured debts paid off. The plan can take anywhere from 3-7 years.
In most cases, this will not have a negative impact on your credit as long as you are able to follow the debt management plan as it is agreed upon. Many debt management companies require you to make your payment electronically, removing the concern of your payment reaching them on time.
Your consumer accounts will be closed and you will not be allowed to open more while you are in the program, but you will see the following benefits:
- On convenient monthly payment.
- Reduced and possibly eliminated interest rates.
- Elimination of fees.
- No more collection calls.
- Your accounts will be considered current after a specified number of on-time payments (usually 3).
- Peace of mind.
Credit counseling is not for everyone. You will have to be able to make a 2 percent payment in most cases in order to be accepted into the program. So, if you are no longer able to make minimum payments, credit counseling is not the option for you. You are starting to see more and more credit counseling companies as the need for them becomes greater. If you are in a position where it feels like the noose is beginning to tighten, you may want to look into consumer credit counseling.