With the average American household’s debt climbing past $8,000, pundits agree that something must be done to alleviate the intense credit woes of consumers. Answering this emergency call, consumer credit counseling is becoming an increasingly popular option amongst powerless debtors. Providing consolidation and negotiation services, counseling companies offer affordable alternatives to debtors unable to pull themselves out of the red.
A continuing source of insufferable misery, perennial debt hogties a consumer’s cash flow while, in tandem, ruining their credit rating—not to mention causing fantastic amounts of worry and stress (over half of American households report significant trouble in meeting minimum monthly credit card payments). Credit counseling services, however, strive to allay these concerns by dealing directly with creditors to lower or eliminate interest portions of monthly payments.
Under the shelter of tax laws concerning non-profit organizations, credit card companies, eager to recoup principal payments from debtors, sponsor consumer credit counseling agencies that are authorized to partially eliminate portions of debtors’ interest payments—which then becomes a tax write off for the credit card company. Counseling agents are, additionally, able to consolidate a debtor’s accounts into one manageable monthly payment. Debtors settle financial obligations through the agency, which in turn disseminates the acquired funds to the appropriate creditors. In this situation, everybody wins a little. Creditors recoup tiny portions of interest and the bulk of principal, and debtors consolidate debt into a largely interest free, controllable monthly installments. To cover expenses, credit counseling services ordinarily charge nominal fees (typically, $10 or $25 a month).
Another viable counseling option is debt negotiation. If debts are completely insurmountable, debt negotiation provides for the arrangement of a lump-sum partial payment of principle owed. Sometimes a credit counselor can lower overall debt obligations by 70 or 80%; however, credit history suffers miserably after this procedure (poor credit ratings remain on record for 7 years). Consequently, debt negotiation is solely for debtors with substantial and insufferable debts who are considering bankruptcy (since creditcounseling services are affiliated with credit card companies, bankruptcy is rarely, if ever, encouraged as an option), and who already suffer from poor credit.
Besides providing opportunities to evade current debt, consumer credit counseling attempts to persuade customers to adopt smart, savvy credit practices to ultimately repair lending damage. When employing the services of a credit counselor, all remaining credit cards are routinely remanded to the agency, in order that a debtor does not incur anymore debt. And, by abiding the monthly payments negotiated by the credit counselor, debtors can begin to rebuild credit history—allowing for future credit opportunities.
More and more households bound by interminable debt are examining the mutually beneficial merits of credit counseling. With the opportunity of salvaging one’s credit rating while concurrently slashing debt and unmanageable monthly payments, consumer credit counseling provides a worthy and much needed service to a growing number of Americans. And the ever-present and proliferating capabilities of the Internet are bringing these services to the living-rooms of previously neglected consumers who find themselves lessening stress and avoiding those old, pesky noogies.
By Jean-Pierre Lacrampe
Other Resources:
Need help with your credit card debt?
Make a difference and donate to a charity today.