Consumer Credit Counseling
Consumer credit counseling has been generally accepted as one way of consolidating one’s debts. The aim of consumer credit counseling and indeed any debt consolidation program is to reduce the amount of debt over time and also the frequency of regular payments for the debt.
How it works is the consumer credit counseling service or debt management company liasions with your creditors on the debtor’s behalf.
They first make a proposal of how much debt is owed and how much the debtor is willing to pay to the lender on a regular basis, i.e. once a month of weekly. The lender doesn’t usually dismiss this offer of payment as it means they will be getting their oney back, and if the debtor continues the payment through to the end, they will also collect a sizeable interest on the debt, so it would nothing but a gain for the lender to accept the payment terms, especially if they are coming from a reputable third party that has an excellent record with getting clients to settle their debts
Credit counseling services can significantly reduce the regular payments for the debt, but it should be noted that the debt is not wiped out, the debtor is still responsible for 100% of the original debt, which will still be paid in full plus any interest charges; even with the use of a third party consumer credit counseling service, just that using a credit counseling service reducs the minimum payments each payment cycle.
While undergoing a credit counseling service the FICO score of the debtor is not affected, however certain lenders frown on giving more credit to an individual undergoing credit counsel services, as it sometimes means they might have filed Chapter 13 bankruptcy procedures, for the fear that they might be unable to repay their debt, and it is not such a bad thing, as the temptation to fall back onto old habits would be extremely high seeing a line of credit has been made available.
The usual time frame for a credit counseling service is approximately five years, and if the debt is successful cleared in that period, the credit score and rating of the debtor goes even higher than before.
However credit counseling services should only be used if the debtor is confident of being able to clear the outstanding debt during the time span, which can seem like a chore if the payments are sizeable and last for upto five years.
Visit Debt consolidation for some great consumer credit counseling services, and dealing with credit card debts in general.
Filed under: credit cards for bad credit