How Do Consumer Credit Counselors Help Me?

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Consumer credit counseling can help people who are having trouble paying bills learn to manage money and reduce debt. However, if people are very far in debt, consumer credit counseling may not enable them to make enough progress to get out of debt, making bankruptcy a possible option. The best candidates for credit counseling:

  • Cannot make the minimum payments on their credit cards
  • Are always late paying at least one of their bills
  • Are being contacted by collection agencies and their creditors
  • Have already tried to work out a payment plan with their creditors, but the creditors have not accepted it [source: Weston]

If you choose consumer credit counseling, the agency will first help you by examining your finances. Trained counselors will help you work out a plan after looking at your income and your expenses. They will give you ideas on how to pay back what you owe by cutting back expenses or showing you how to better manage your money.

The second step, if you need it, is debt restructuring and repayment. The credit counseling agency will contact your creditors and try to negotiate a new payment plan that you can afford. The creditors might accept a smaller monthly payment, happier to get something than nothing at all if you were to go into bankruptcy, or they may lower the interest on your remaining debt. Once the payment plan has been settled by the counselors and the creditors, you will only have to make one payment per month to the credit counseling agency. They will give your money to the various creditors, and the hassling calls should stop.

Consumer credit counseling session
Photo by John Nordell/The Christian Science Monitor via Getty Images
Credit advisor Nicole Atchinson of Consumer Credit Counseling Service helps Worldy Armand on Aug. 17, 2004, manage his debt in Boston, Mass. Armand is straightening out his financial affairs as he prepares for school.

Lastly, the consumer credit counseling agency will offer credit education. It may be tempting to skip this step because you are no longer being hounded by creditors, but stick to it. Financial education is the key to staying out of debt. Credit counselors will teach you how to manage your income and expenses. They will also show you how to use credit wisely and create a future financial plan [source: CreditPage].

Even if you do not need consumer credit counseling, it may be beneficial to get more financial education. Many credit counseling firms host various financial education courses, including budgeting and debt management. You can never have too much knowledge.

Fees

Many credit counseling ervices are not-for-profit, and usually cost little to nothing. There may be a small setup fee and monthly fees to cover expenses, but they should be no more than $10 to $50. Some may cost nothing at all. If a consumer credit counseling agency tries to charge you high fees, look elsewhere.

By correctly following a consumer credit counseling plan, you should be free from debt in about two to four years. It may be a slow process that takes discipline, but you will feel much better knowing you are in charge of your finances. And the next time your phone rings, it will be someone you want to hear from, instead of a creditor or collection agency.

For more information about credit card debt and your options, see the links on the next page.