Credit Counseling Services For The Consumer

Consumer counseling services are always a great route to take in your DIY attempts to get out of debt, however, it’s important to read the small print and keep in mind that your credit will not be fixed overnight.

Consumer counseling basically aims to lower your interest rates with your creditors while counseling you on how to manage your finances. A credit counselor will sit down with you a specified number of times a week or month, work with you on your finances and where you should and should not be spending money, and will negotiate with your creditors to lower your rates and your payments.

The downfall to all of this is that they do not negotiate your ending balance, and though your monthly payments may lower and your interest rates might look better, your ending balance will only continue to rise and you will be stuck once again.

Most consumer credit counseling services these days prey on people who have never even been late on a credit card payment, but are unhappy with their high interest rates. These days, who isn’t unhappy with their credit card rates? Where the credit counselor will get you is when you agree to listen to their plan, they suck you in and offer you debt settlement services instead, with outrageous upfront fees.

The shadiest part of the credit counseling route is that many companies get a “kick-back” from the lender themselves! Here’s the rub: according to MSN Money, most of the counseling services' fees are paid by the lenders themselves, which send back to the services a portion of the payments received. This has led some critics to charge that credit counseling is just a tool of the lending industry.

So, when do you need credit counseling? Almost never, in our opinion. If you are making your credit card payments on time, then there is no reason to answer the call when the credit counselor hits you up. Even if you have fallen behind slightly, it’s no reason to look to counseling. In most cases, you can go the DIY route and get yourself out of debt rather than use credit counseling.

If you are considering counseling, look for the red flags. Make sure that the company you’re researching is accredited with Association of Independent Consumer Credit Counseling Agencies or ACCORD. Also, if you are charged anything over $15 for the initial set-up fees, run for the hills. They are likely going to charge you for every little thing and take most of it for themselves if they start out by charging you ridiculous fees.

Finally, if the credit counselor makes any promises regarding your balance, interest rates, or credit score, turn around and walk out of his office. Every credited and respectable company knows that promises and guarantees are unfortunately not a part of the industry. While any debt settlement and negotiation company would love to tell you that they can make promises regarding your final balance and repayment time frame, in reality it just cannot be done. There is no way to guarantee results when it comes to negotiating debt, simply because there are too many parties involved to guarantee a final outcome.

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