Credit Counseling Pros And Cons

Should i, or shouldn't i? what are the good points and bad points of credit counseling?  i'm looking at various ways on how to relieve myself of debt and i hope you can help.

Being part of a credit counseling program shows your creditors that you have the intention of taking care of your debts. The downside to that is, you won't be allowed to apply for new credit while you're on the program.

Some Credit Counseling Services actually are working in collaboration with your creditors. Not only do they charge a monthly fee from you, a percentage of their earnings come directly from the people whom you owe. There are also a number of credit counseling firms that claim they are non-profit yet charge "voluntary contributions," which I think is a shame.

What are other alternatives to relieving us of debt? Seems to me like credit counseling is all that bad

Actually, the credit counseling process allows the individual to be acquainted with a payment system that helps him/her get their financial situation under control. First the consumer will undergo personalized counseling sessions with a certified counselor. The latter will educate the debtor on how to manage their finances, how to create a feasible and workable budget, and gear them towards a debt-free future. If the counselor thinks that the customer needs to take a step further into fixing their debts, then they will recommend a debt management plan.

Aside from what Karess said, credit counseling--thru the Debt Management Program that was mentioned a while back--helps in reducing your interest rate and making a lower monthly payment. A DMP combines all your unsecured debts together into one debt, and the CCCS will discuss and negotiate terms with your creditors. If I am not mistaken the interest rate will be brought down to 15% from whatever interest that you currently have. Also late fees and interest charges may be cut down because of the plan. You'll be making one payment each month for all of your debts at a minimal amount. Of course you also need to make sure that the regular payments you'll be making to the CCCS monthly are payments you can afford.

Of course the possible downside for the DMP is, well, since the payments are small, you'll be paying off your debts for a much longer time. Typically it takes 3-5 years for that to happen.

Here's a helpful article posted on the Federal Trade Commission website on credit counselors. Their pointers are very helpful and insightful, too.

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre26.shtm

If you're trying to get a mortgage while being part of a DMP, a number of loan programs will immediately disqualify you. Credit counseling is considered as bad as bankruptcy in a some creditors' eyes and can be pretty tricky in terms of qualifications for future loans. Aside from that, being in credit counseling will also be marked on your credit report.

wow thanks for all the responses, i've been reading through them and it's very helpful

have questions too

1. How long won't i be able to apply for new credit when I'm under credit counseling?
2. Will my accounts ever be made current? I'm paying for them anyway.
3. And yes just like what was asked, what are other akternatives?

thank you again for your feedback

1. You won't be able to apply for new credit for as long as you are under the program. It is part of your agreement with your CCCS, and once this agreement is broken, you will be immediately be removed from the program.
2. Accounts may be re-aged, or brought current, while under a DMP. This is under the creditor's discretion. You need to find out when it will be reaged and how many payments it would take for them to do so.