Credit Counseling to get out of Debt

If you’re swamped by mountains of debt, you’re not alone. Millions of people today are being slowly suffocated by overwhelming debts. With worldwide recession, record job losses and a difficult economic climate, it’s no wonder that so many people find it necessary to live on emergency credit for a prolonged length of time. Unfortunately, living on credit can hasten a downward path toward insolvency and, ultimately, bankruptcy.

Although declaring bankruptcy may be unavoidable, it’s important to be aware that you might have some viable alternatives. Before you take such a drastic step, it’s a good idea to consider talking to a reputable credit counseling service. By consolidating your debts into a lower monthly payment, you might even find yourself out of debt within three to five years.

Credit Counseling to get out of DebtConsolidation

The main purpose of a credit counseling program is to help you better manage your debts by consolidating them into one monthly payment. Be aware, though, that this consolidation plan primarily involves your credit card debts. Generally speaking, you won’t be able to bundle your mortgage, car or student loans into these consolidation payments. There are a number of other reputable services, however, that can help you manage and even consolidate these larger loans and many credit counseling programs also offer separate services to help you manage these long-term financial commitments.

Many consumers don’t realize that reputable credit counseling services are actually authorized to negotiate with major credit card companies such as VISA, MasterCard, Discover and American Express. These companies want to recover as much of the initial loan as they can, but they’d rather recoup a portion of the debt than lose the possibility of payment if the debtor goes bankrupt. That`s why lenders are willing to work with credit counseling services to lower minimum payments and even erase a part of the debt, depending on its size.

Debt Forgiveness

Many lenders are willing to make a deal and accept a negotiated, one-time payment that represents only a fraction of the amount owed. Credit counseling service representatives are adept in being able to negotiate these terms. By using a credit counseling service, you may find that one of your major lenders is willing to settle for only half of the payment you owe, provided you can pay it all off at once.

The only downside to this arrangement is that you may not have enough money to pay off even a portion of the debt at once. If you can’t take advantage of the offer, don`t let it concern you unduly. Just remember that the offer was made and, if at a later time, you have the money, you or your counselor can contact the lender again and make another offer.

Fees

Most reputable credit counseling services don’t demand a large upfront fee. Instead, they ask for a small set-up fee and then implement a small monthly processing charge, which can be as little as $15-$20 depending on where you live and which service you`re using. Steer clear of credit counseling services that ask for a large amount upfront or impose large monthly administrative fees.

Credit counseling services aren’t for everybody. If you prefer calling your credit card companies and negotiating lower minimum payments yourself, you may be successful, although you won`t have the convenience of one consolidated payment every month. Likewise, you may be in a position to make more money and get back on track with your regular payments within a short time, so you may not find it necessary to consider consolidation. For many people, however, credit counseling services offer a lifeline in helping them manage their debt.

When managed correctly, credit can be a good thing to have. However, if you’re in debt, your out of control credit problems can become a nightmare. By researching sources or talking to credit and financial advisers, you can learn more about how to make your available credit work for you, not against you.

Author Bio: Tony Martin writes regularly for a wide range of finance and technology websites. Over the course of his career, Tony has contributed to a wide range of in house and national magazines on subjects as diverse as cars, gadgets and mobile phones together with his main focus which is the finance sector.

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