Archive for debt management

What Exactly is Consumer Credit Counseling?

There are many different meanings for the term consumer credit counseling.

In it’s simplest form, credit counselling is the process where you meet with a credit counselor and they give you advice on managing your money. They will help you deal with credit card debt, and they will explain how to improve your credit score on your credit report.

In addition, if you are planning to file for personal bankruptcy in the United States, they will conduct the mandatory credit counseling before filing bankruptcy, and the post bankruptcy filing credit counseling session. In Canada, the credit counsellor will conduct the credit counselling during the bankruptcy process.

Finally, a credit counselor will actually negotiate with your creditors on your behalf through a Debt Management Program where you make one payment each month to deal with your debts.

For more information, consult a local credit counselor.

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Can I buy a House if I go through Credit Counseling?

consumer credit counseling is a great way to deal with your debts, and by dealing with your debts you put yourself in great shape to one day own a house.

To buy a house you need a down payment, but if you are using all of your money to repay your debts, you will never be able to save for a down payment.

Credit counseling allows you to get out of debt, so you can start saving to buy the home of your dreams. But there is more to credit counseling than just getting rid of your debts.

Credit counseling will also teach you money management skills. If you manage your money properly you can save for that house faster.

The point is that credit counseling will deal with your debts, and give you the skills necessary to manage money and buy your first house.

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Should I Refinance my House, or go to Credit Counseling?

If you have a lot of high interest rate debts, like credit card debt or loans from finance companies, a debt consolidation loan may be an option worth considering.
If you own a house, you could use the equity in your house to get a debt consolidation loan.  The bank or mortgage company lends you money at a low interest rate, since the debt consolidation loan is secured by your house, so it’s low risk, and you use the money to repay your high interest credit cards.
Refinancing your house lowers your interest rate, but it also means that you have “used up” some of the equity in your house.  If you decide to sell your house before the debt consolidation loan is repaid, the amount you get from the sale of your house will be reduced by the amount outstanding on the mortgage.  If the real estate market declines, you get even less for your house.
In addition, if you have a 25 year mortgage, you will be repaying your debt consolidation loan over 25 years.  It will take 25 years before you are out of debt.
Most credit counseling Debt Management Programs last for three or four years, so with credit counseling, you can be out of debt quicker.
If you want to get out of debt quicker, and you can afford the payments, credit counseling is often a better option that refinancing your house through a debt consolidation loan.

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What Questions Should I Ask my Credit Counselor?

Many people are intimidated and embarrassed by the credit counseling process. To get you started, and to make sure you are fully informed, here are some questions to ask your credit counselor

  1. What services do you provide? Some consumer credit counseling services only prepare Debt Management Programs to help you repay your debts. Others are full service, and also offer budgeting advice and credit repair services.
  2. What qualifications do you have? You want to deal with an accredited counseling agency, and preferably with a credit counselor with many years experience.
  3. What do you charge? Are you a non profit credit counseling service?All reputable credit counseling agencies will disclose their fees in full up front; if they don’t, go to another service.
  4. Will my personal information be kept confidential? Most credit counseling services have a confidentiality and security policy, to prevent your personal information from being disclosed inappropriately.

You are the consumer, so be sure you understand the process before you start your credit counseling.

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What are my Debt Management Options?

Debt Management is exactly what it sounds like: it’s a process for managing your debts.
For most people debt management means making a budget, and then reducing expenses so that you have enough money to repay your debts.  If you don’t know how to make a budget, a debt management credit counseling gets you the advice you need from a credit counselor, while helping you manage your debts.
Your credit counselor will help you make a budget, and then work out a plan to repay your debts, which may involve a formal debt management plan.  If you don’t have the discipline or ability to repay your debts on your own, a debt management plan, administered by your credit counselor, may be your best option.

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