Credit counseling is a booming business because there are so many people in debt. When consumers involve credit counselors, they ask the counselors to help pay their debt in a timely manner. These counselors generally contact creditors in order to establish an easy payment plan.
Before you settle for one counseling service, you need to research the company. The best advice is to look at the Better Business Bureau’s website: www.bbb.org. This website allows you to find satisfactory or unsatisfactory information on both businesses and charities. Once you have found the service that’s right for you, you should come in and let the counselor look at your credit history. Sometimes, a counselor will offer you the debt management plan, a plan that consolidates your various sources of credit into one payment. If they offer this plan before 20 minutes have past, run! Usually, a legitimate counseling session lasts between 60-90 minutes. The good ones also offer an alternative plan—classes on how to budget your finances.
Debt management plans are exclusively for unsecured debt, such as credit cards and medical bills. What about secured debt like a home mortgage or car loan? Experts suggest that secured credit should take precedence over unsecured credit because if you fail to pay off secured debt, your property may be repossessed.
You are a great candidate for credit counseling if you have a substantial and consistent income. Some services offer secured credit counseling, but insist that you have a FHA mortgage. If the service does not offer secured credit counseling, you have to deal with lenders on an individual basis. If it’s a car that you are worried about, remember that even if your car was repossessed, you are still responsible for payments. While the counseling sessions may not let you consolidate secured debt, the service may contact creditors in order to lower interest rates or reduce fees.
Sometimes, counseling services offer help only if you are a homeowner. As equity builds significantly, lenders may offer great home equity loans. Sometimes, credit counseling services offer little more than a home equity loan. When you decide to use your loan for credit counseling, you are converting your unsecured debt to secured debt. This means that if you fail to pay, you could lose your home!
According to eloan.com, another disadvantage of credit counseling in general is your inability to use any credit cards or apply for new ones. You also have to deal with general consultation, not a service that is customized for your needs. You should beware of any scams or con artists. You should always talk in-person, not over the phone.
Not all is lost for credit counseling. The greatest advantage that credit counseling offers is the ability to pay one easy payment. When this happens, you may find yourself with extra cash lying around. Another upside to credit counseling is that it doesn’t reflect on your credit report.
So, what have we learned? Secured credit counseling may not be the right option for you, because it involves property that can be seized at any time. That is why most of these services refuse secured credit counseling. If you want credit counseling, opt for unsecured credit counseling. Unsecured credit counseling will not result in repossession if defaulted.
By Michelle Presbury