Hiring the services of a company that provides credit counseling debt relief can be a smart step for many who need help dealing with excessive credit card debt. Yet, there are a few things you should know before signing on the dotted line with one of these firms.
Begin by taking the necessary steps to ensure you choose a highly reputable company that provides a full range of credit counseling debt relief services. This means you need to do your homework and research available companies and learn about exactly what they provide.
Inquire about credentials, experience, success rates, and the type of clients they work with. While there are many reputable firms that provide debt counseling, sadly there are companies that will say about anything to get you to sign with them so they can make an extra buck or two. For more information on agency selection tips, click here: credit card debt counseling.
If the counseling agency you hire decides that a formal repayment plan is right for your situation, your firm's representative will advise your creditors and seek approval before initiating the plan. Chances are likely that the repayment plan will be reflected in your credit report and may impact your credit rating.
Therefore, be sure to discuss this with your agency representative before proceeding. You need to be fully aware of the ramifications of each aspect of your debt relief effort and the services you receive.
At the same time, remember that re-establishing creditworthiness takes time. It requires a thoughtful, step-by-step process, as well as a commitment to replacing old money habits with new ones. A good debt relief counselor can help you on that path.
Since counseling companies are often funded by none other than credit card companies, they may be tempted to put you on a rapid repayment plan that has a high monthly payment. While a higher monthly payment clears your loan obligation faster, make sure you can afford the monthly amount before agreeing to it.
If you are not comfortable with the monthly payment requirement – or any aspect of the services you receive – speak up. Ask your representative to work out different terms until you are satisfied with the approach and your obligations.
What a Debt Relief Counseling Company Cannot Do
Engaging the services of credit counseling debt relief agency is a good idea for most debt circumstances. Yet, there are limitations to what these type of firms can do for you.
More often than not, counseling does not reduce the amount of money you actually owe your creditors. The creditor-imposed monies may get reduced slightly if your counselor has successfully negotiated a lower interest rate or fee reduction. But, the principal amount you owe (which is what you actually charged on your card) still remains the same, and is usually not subject to negotiation.
Another misconception regarding debt counseling services is that an agency can help immediately improve your credit rating. Unfortunately, that is not the case. Your credit score may improve over time, assuming you stick to your payment schedule until your balances are cleared in full. But in the short-term, your score may be negatively impacted, as noted above.
This may cause difficulties in getting new lines of credit in the short-term. Yet, while you are working towards eliminating your debt, you should not be seeking new loans that undermine your debt reduction efforts.
The services of credit counseling debt relief agencies cannot be used for managing or repaying all kinds of loans and obligations. Although counselors may offer debt relief guidance and money management advice, they typically work to help you pay off only your credit card debt.
Therefore, your utility bills, telephone bills, car loans or mortgages are not usually included in loan repayment plans.
Knowing these limitations of credit counseling debt relief services can help you be more aware of what to expect and decide whether an agency is indeed the right choice for you.