Do You Need a Credit Counselor?
Summary: Are you struggling to pay your bills each month? Are your credit card balances growing? Is the balance in your checking account dropping toward zero by the end of each month? Click through to learn what a credit counselor can do for you.
You don’t need to be in a financial crisis to work with a credit counseling agency. But if you are struggling financially, working with such an agency can help you create a plan to overcome your money problems.
If you are struggling to pay your recurring bills each month or you owe thousands of dollars on your credit cards, a credit counseling agency can help you form a plan to build your savings and pay off your debt.
What if you are regularly making late payments on your auto loans or credit cards? A credit counselor can help you change your negative spending habits and build a new history of timely payments.
What does a credit counselor do?
A non-profit credit counselor will first review your finances, looking at your savings, expenses, debts and credit reports. This counselor can then work with you to create a plan to pay down your debts and build your savings.
This plan will vary based on your financial situation. But if you are carrying a lot of debt, your counselor might recommend a debt management plan.
Under such a plan, your credit counselor will combine your monthly debts into one monthly payment. Typically, you’ll make a single payment to your credit counseling agency. The agency will then use that money to make your monthly payments on your behalf.
The goal is to make it easier for you to handle your many debt payments. Instead of having to remember the due dates for several payments, you’ll only have to focus on one.
As part of the debt management plan, your credit counseling agency might negotiate with your creditors to forgive a portion of your debt. The agency might also work with your creditors to reduce the interest rates on your debts.
Remember, though, that none of this is guaranteed: Your creditors are under no obligation to reduce your debt or interest rate, though some might do either or both if they think it’ll help them get at least a portion of the money that you owe.
How to find a credit counselor
It’s best to work with a non-profit credit counseling agency. Though it varies, many non-profit agencies will either work for free or charge you a low fee for their services. That’s because many of these agencies are funded by grants.
A good place to search for non-profit credit counseling agencies is the website of the National Foundation for Credit Counseling, which you can find at nfcc.org. Once you log onto the site, you can search for counselors in your area.
The NFCC says that most of its member organizations offer credit counseling for free, though they might charge for specific services. Make sure when meeting with a credit counseling agency to ask upfront about any fees that they might charge.
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