Countless consumers are more familiar with debt than they’d prefer. Although many people turn to avenues like bankruptcy and consolidation, they may benefit from seeking professional insights before deciding how to resolve their money problems. Naturally, this leaves consumers wondering: Just how does credit counseling work? Here’s a quick breakdown that should make the process easier to understand.
What Is Credit Counseling?
When people get into more debt than they can manage, their future depends on their ability to make wise decisions. For instance, there are many different kinds of bankruptcy, and they aren’t right for everyone. Likewise, debt settlement comes in various forms that may not be appropriate for every situation.
Credit counseling seeks to close the knowledge gap. This process involves a credit counseling professional walking debt-laden consumers through their options so that they can make smarter choices. By connecting consumers with resources that help them budget, evaluate debt consolidation options and educate themselves on predatory practices, counselors give people more power to make responsible decisions about debt resolution.
Why Is Credit Counseling Beneficial?
Credit counseling is a crash course on how to move forward in life with your finances, which can be tricky for debtors. For many consumers, dealing with debt was never an issue until it suddenly became a major problem. It’s all too easy to get caught off guard, and most people don’t learn how to file for bankruptcy or negotiate with creditors until they are on their own.
Credit counseling also provides a lot of practical knowledge that can help people change their ways for the better. For instance, many consumers who get into debt have notoriously bad habits, such as using credit cards to pay off other debts, relying on payday loans with criminally high interest rates or ignoring their creditors in the hopes that the problems will magically vanish. Good counselors work to help people identify these issues and acquaint themselves with better alternatives.
What Do Credit Counseling Agencies Offer?
As businesses and nonprofit entities, credit counseling agencies provide a variety of different services. In addition to the basic task of teaching consumers about their debt situations and how to become more responsible, these companies can often:
- Negotiate with creditors on a debtor’s behalf and reach settlements regarding debts that the debtor can’t pay,
- Arrange debt relief agreements where un-payable debts are partially or completely forgiven,
- Consolidate numerous unsecured debts into a single loan that may be easier for the consumer to deal with, and
- Help consumers find free debt services that might help them climb out of the financial hole.
What Should Consumers Look for in Credit Counseling Providers?
Choosing the right credit counselor is an essential part of resolving any debt. For instance, working with a company that only offers negotiation might not help if the creditors have already proven unwilling to come to the bargaining table.
How can consumers make the right choices when faced with so many different options? Start by evaluating each provider based on their credentials. Although the U.S. Federal Trade Commission, or FTC, can punish credit counselors that act in bad faith, consumers don’t have to wait until they’ve already been misled to take action. Instead, people can be proactive by looking for certifications from one of these professional bodies:
- The National Association of Certified Credit Counselors (NACCC) is an educational organization that strives to help it’s members provide excellent service to their clients. As a member, you can be sure the credit counselor you are working with has exceeded the expectations set forth by the NACCC.
- The National Foundation for Credit Counseling, or NFCC, is a nonprofit that certifies credit counselors according to a rigorous set of standards.
It’s also worth noting that many local regulators enforce rules regarding credit counseling activities. Checking with a state Attorney General’s office may be a smart way to avoid companies that have had problems in the past.
Can Credit Counseling Put Consumers on the Right Path?
The best credit counseling agencies get things rolling by working to understand each client’s particular financial situation. Building this impartial outsider perspective is a major advantage for consumers who don’t know where to turn.
Going through an approved form of credit counseling may also be a prerequisite for other types of resolution. For instance, most bankruptcy courts want proof that consumers have received advice before they’ll accept their petitions. Creditors that were wary of entering consolidation arrangements or settlements may feel more confident about moving forward once they know that debtors have received professional help.
How to Get Started With Credit Counseling
When dealing with debt, most people simply want to get things over with. Taking the extra time for counseling can make it far easier to reach a workable resolution, however, and learning about better consumer habits is key to avoiding future debt issues. Find out more about how credit counseling works in real life by talking to one of our certified experts at Christian Debt Counselors today.