Credit Card Counseling
Posted October 29th, 2009
Credit card counseling is not just about talking to a professional adviser about your credit card debt. It will certainly involve that conversation, and that may be the extent of the relationship, but it may also involve the counselor working on your behalf to reduce your monthly payments to your various creditors by working out a longer-term repayment plan.
If the counselor is able to work with you to create a budget plan so that your debts are repaid in accordance with creditors’ original terms, this is clearly the best way forward as your credit rating will be better off. If, however, your credit card debts are so unmanageable that you are missing payments and falling into arrears, then more drastic action may be taken. This will involve the counselor making contact with your creditors and organising a lower monthly figure to be repaid over a longer period of time. Creditors are usually amenable to this course of action if the alternative is that you may be heading for bankruptcy, in which case they will have to completely write off the debts owed to them. Credit card counseling is also a less serious step than if you were to seek a credit card debt settlement, which could simply wipe out around half the debts you owe before any new repayment scheme is even put in place.
Although you will have worked out a reduced payment plan with your creditors, credit card counseling can actually increase your credit rating from where it was when you were defaulting. This is because credit companies accept that you are at least doing something to clear your debts, rather than letting them swamp you and drag you towards bankruptcy.
Once the new payment amounts have been agreed by your creditors, you then make your payments direct to the debt counseling company, which then distributes them accordingly between your various creditors. You will have a smaller amount to pay each month, and it will be just the one payment, therefore easier to manage, but it will last much longer than if you were to pay off your debts at the original monthly payment levels.
The other downside of credit card counseling is that it may involve higher fees and a higher rate of interest on your debts, to offset the fact that the creditors are having to wait longer for their money.
One obvious proviso: You must make certain that the credit card counseling company you deal with is reputable. Everything should be written down in black and white, and not until all creditors have agreed in writing to the proposals should any money be deposited with the counseling company. It is essential that the terms and conditions are read in thorough detail.
Related posts:
- Guide To Financial Counseling
- Credit Card Debt Settlement
- Where To Find Help When I Can’t Pay My Bills
- What Exactly Is A Debt Agreement?
- What Is Bankruptcy?
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