A little advice on credit counseling

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Written By RandyYoumans

To empower, educate, and entertain our readers with high-quality content that deepens their understanding of the automotive world and fuels their passion for cars.





Recently, I was asked my opinion about credit counseling services. Despite not having used credit counseling services (no matter how many times my significant other suggested it), I do have some solid opinions and a good understanding of the process.

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Credit counseling seems like a great idea at first glance. Consumers in debt can meet with a counselor to help them renegotiate their payments, which may result in reducing their owing amount. Counselors can help consumers set up affordable payment plans, which will make it easier to repay the debt. These credit counseling companies are often a preferred option for creditors because of the benefits they provide. Although merchants and banks may not like the idea of negotiating their debts through a consumer credit counselor it is better than being denied payment.

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Consumer credit counseling is not about the consumer. It’s all about making money. Consumer credit counselors don’t care about helping people. They are focused on making money. This has led to a huge scam where credit counselors are more interested in making money than helping consumers. Many of these programs are actually run by lenders, which is why they don’t offer much help. Many lenders won’t touch you with a ten-foot pole after you have completed one of these “credit counseling” programs.

Lenders won’t consider granting loans to those who have been referred by credit counselors. Working with these “credit counseling agencies” means that someone else will tell you how much you need to repay your creditors. They won’t try to negotiate a settlement with your creditors. Credit counselors make a profit from the difference between what they charge and what your debtors will accept. Your credit counselor may say that Visa can settle your debt for $300, even though you owe $500 to Visa. The counselor gets Visa to settle for $250 less than what you agreed to pay. The difference is then pocketed by the credit counseling company without you knowing.

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Credit counseling can lead to credit damage, creditors not being happy with the money received and credit counselors making less money.

Credit counseling is an option if you find yourself in a difficult financial situation. People don’t take the time to learn what they can do to stop phone calls and letters. This can lead to poor decisions (such as joining a credit counseling program). Once you have learned about your rights, send a letter to your creditors (return receipt required) and explain the situation. Tell them how you plan to pay them back. Ask for their assistance. Do not threaten creditors with bankruptcy. Just tell them that you are determined to repay the debt quickly. Ask for their assistance with late fees and interest rates. Ask them about the payment plans that they offer to people who are in financial trouble. Ask them if they offer payment plans for people who have fallen on hard financial times because of a medical condition or natural disaster. Let your creditors know and ask them to provide proof. Your creditors might be more accommodating than you think.

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You can avoid the debt repayment plan or credit counseling agency and instead work out a settlement with your creditors. Do not let the middleman profit from your misfortune.