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Do You Need A Credit Counseling Service?

by Mike

Debt doesn’t usually happen overnight.  It sneaks up on people slowly.  You make a couple of bad financial decisions, spend a little more than you can afford, or run into some unexpected expenses for which you weren’t prepared.  You figure a little bit of debt isn’t the end of the world.  After all, everyone else is doing it. But the little bit of debt that doesn’t seem like much starts to grow.  More and more of your paycheck goes to interest charges and your credit card balances keep going up instead of down.

Admitting that you need help can be difficult.  Debt problems can be particularly embarrassing because we fear people will judge us.  But if you’re struggling with debt and can’t seem to find a way to dig yourself out, it may be time to consider consulting a credit counseling service.  A credit counselor can help you take control of your debt and get your financial house back in order.

What to Expect

When you go for credit counseling, you’ll have to sit down and discuss your financial situation in detail.  The counselor will want to know how much debt you have, the kind of debt, and how you got into debt in the first place.  You’ll go over your income and expenses one by one as well so the credit counselor can get a clear picture of your financial situation.

Then the counselor will make recommendations on how you can improve your cash flow.  He’ll help you create a budget and track your spending, and he will suggest areas where you can cut expenses.  The more money you can save by trimming expenses the more you will be able to use for paying down your debt.

A credit counselor may also help put you on a debt management plan, though you are not required to do so.  In a debt management plan, the credit counseling service contacts your creditors and negotiates lower interest rates.  Since your interest rate is lower more of your payment will go towards principal and you will be able to get out of debt faster.

As part of the debt management plan, you usually don’t make payments directly to your creditors.  Instead, you send your monthly payment to the credit counselor and then he pays each of your creditors for you.

Keep in mind that there are usually fees involved with using a credit counselor and using a formal debt management plan may have an effect on your credit score. But if you haven’t been able to dig yourself out on your own, it may be the best choice you have left.

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